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PART IV

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K



(Mark One)    
ý   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 2013
OR
o   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. 001-31560

SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)

Ireland   98-0648577
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)

38/39 Fitzwilliam Square
Dublin 2, Ireland
(Address of principal executive offices)

Registrant's telephone number, including area code: (353) (1) 234-3136



Securities registered pursuant to Section 12 (b) of the Act:

Title of Each Class   Name of Each Exchange
on Which Registered
Ordinary Shares, par value $0.00001 per share   The NASDAQ Global Select Market

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



         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý    NO o

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. YES o    NO ý

         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 ý    NO o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ý    NO o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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. ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o    NO ý

         The aggregate market value of the voting and non-voting ordinary shares held by non-affiliates of the registrant as of December 28, 2012, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $10.7 billion based upon the closing price reported for such date by the NASDAQ.

         The number of outstanding ordinary shares of the registrant as of August 1, 2013 was 356,816,941.

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A relating to the registrant's Annual General Meeting of Shareholders, to be held on October 30, 2013, will be incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the SEC no later than 120 days after the registrant's fiscal year ended June 28, 2013.


Table of Contents

SEAGATE TECHNOLOGY PLC


TABLE OF CONTENTS

Item
   
  Page No.  

 

PART I

       


1.


 


Business


 

 


4

 


1A.


 


Risk Factors


 

 


18

 


1B.


 


Unresolved Staff Comments


 

 


36

 


2.


 


Properties


 

 


36

 


3.


 


Legal Proceedings


 

 


37

 


4.


 


Mine Safety Disclosures


 

 


37

 



 


PART II


 

 

 

 


5.


 


Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


 

 


38

 


6.


 


Selected Financial Data


 

 


41

 


7.


 


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


 

 


43

 


7A.


 


Quantitative and Qualitative Disclosures About Market Risk


 

 


58

 


8.


 


Financial Statements and Supplementary Data


 

 


61

 


9.


 


Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


 

 


114

 


9A.


 


Controls and Procedures


 

 


114

 


9B.


 


Other Information


 

 


114

 



 


PART III


 

 

 

 


10.


 


Directors, Executive Officers and Corporate Governance


 

 


115

 


11.


 


Executive Compensation


 

 


115

 


12.


 


Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


 

 


115

 


13.


 


Certain Relationships and Related Transactions, and Director Independence


 

 


115

 


14.


 


Principal Accountant Fees and Services


 

 


115

 



 


PART IV


 

 

 

 


15.


 


Exhibits and Financial Statement Schedules


 

 


116

 



 


SIGNATURES


 

 


117

 



 


EXHIBIT INDEX


 

 


119

 

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

        In this Annual Report on Form 10-K (the "Form 10-K"), unless the context indicates otherwise, as used herein, the terms "we," "us," "Seagate," the "Company" and "our" refer to Seagate Technology public limited company ("plc"), an Irish public limited company, and its subsidiaries. References to "$" are to United States dollars.

        We have compiled the market size information in this Form 10-K using statistics and other information obtained from several third-party sources.

        Various amounts and percentages used in this Form 10-K have been rounded and, accordingly, they may not total 100%.

        We own or otherwise have rights to the trademarks and trade names, including those mentioned in this Form 10-K, used in conjunction with the marketing and sale of our products.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Some of the statements and assumptions included in this Form 10-K are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended, including, in particular, statements about our plans, strategies and prospects and estimates of industry growth for the fiscal year ending June 27, 2014 and beyond contained in "Item 1. Business," "Item 1A. Risk Factors," "Item 3. Legal Proceedings," and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements identify prospective information and include words such as "expects," "plans," "anticipates," "believes," "estimates," "predicts," "projects" and similar expressions. These forward-looking statements are based on information available to us as of the date of this report and are based on management's current views and assumptions. These forward-looking statements are conditioned upon and also involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or events to differ materially from those anticipated by such statements. Such risks, uncertainties and other factors may be beyond our control and may pose a risk to our operating and financial condition. Such risks and uncertainties include, but are not limited to;

        Additional risks and uncertainties are set forth and are discussed in more detail in "Item 1A. Risk Factors" of this Form 10-K. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Annual Report on Form 10-K. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and we undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.

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PART I

ITEM 1.    BUSINESS

        We are a leading provider of electronic data storage products. Our principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. Hard disk drives are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drives continue to be the primary medium of mass data storage due to their performance attributes, high quality and cost effectiveness.

        We produce a broad range of electronic data storage products including HDDs, solid state hybrid drives (SSHD) and solid state drives (SSD), which address enterprise applications, where our products are designed for enterprise servers, mainframes and workstations; client compute applications, where our products are designed for desktop and notebook computers; and client non-compute applications, where our products are designed for a wide variety of end user devices such as digital video recorders (DVRs), gaming consoles, personal data backup systems, portable external storage systems and digital media systems. In addition to manufacturing and selling data storage products, we provide data storage services for small to medium-sized businesses, including online backup, data protection and recovery solutions.

Industry Overview

        The electronic data storage industry is comprised of companies that manufacture components or subcomponents designed for electronic data storage devices and companies that provide storage solutions through a variety of technologies such as disk drives, semiconductor-based storage technologies such as SSD storage applications and software and services for cloud growth, big data and on-premise and mobility platforms.

        The principal markets served by the electronic data storage industry are:

        Enterprise Storage.    We define enterprise storage as those solutions which are designed for mission critical and nearline applications.

        Mission critical applications are defined as those that are vital to the operation of enterprises, requiring high performance and high reliability solutions. We expect the market for mission critical enterprise storage solutions to continue to be driven by enterprises moving network traffic to dedicated storage area networks in an effort to reduce network complexity and increase energy savings. We believe that this transition will lead to an increased demand for more energy efficient, smaller form factor solutions. These solutions are comprised principally of high performance enterprise class disk drives with sophisticated firmware and communications technologies.

        Nearline applications are defined as those which require high capacity and energy efficient solutions featuring low costs per gigabyte. We expect such applications, which include storage for cloud computing, content delivery and backup services, will continue to grow and drive demand for solutions designed with these attributes. With the increased consumption of media rich content streamed from the cloud, we expect increased petabyte demand for high capacity nearline devices.

        Client Compute.    We define client compute applications as solutions designed for desktop and mobile compute applications. We believe that the demand resulting from growing economies of certain countries and the continued proliferation of digital content will continue to drive demand for the client compute market. As the storage of digital content in the cloud becomes more prominent, some client compute applications require less built-in storage, and therefore alternative storage solutions are becoming more prevalent within the client compute market.

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        Client Non-Compute.    We define client non-compute applications as solutions designed for consumer electronic devices and disk drives used for external storage and network-attached storage (NAS). Disk drives designed for consumer electronic devices are primarily used in applications such as DVRs and gaming consoles that require a higher capacity, low cost-per-gigabyte storage solution. Disk drives for external and NAS devices are designed for purposes such as personal data backup and portable external storage, and to augment storage capacity in the consumer's current desktop, notebook, tablet or DVR disk drive capacities. Client non-compute applications also include devices designed to display digital media in the home theater. We believe the proliferation and personal creation of high definition and media-rich digital content will continue to create increasing consumer demand for higher storage solutions.

        Participants in the electronic data storage industry include:

        Major subcomponent manufacturers.    Companies that manufacture components or subcomponents used in electronic data storage devices or solutions include companies that supply spindle motors, heads and media, application specific integrated circuits (ASICs) and glass substrates.

        Hardware storage solutions manufacturers.    Companies that transform components into storage products include disk drive manufacturers and semiconductor storage manufacturers which include integrating flash memory into storage products such as SSDs.

        System integrators.    Companies that bundle and package storage solutions into client compute, client non-compute or enterprise applications as well as enterprise storage solutions. Distributors that integrate storage hardware and software into end-user applications are also included in this category.

        Storage services.    Companies that provide services and solutions related to the backup, archiving, recovery and discovery of electronic data.

        The continued advancement of cloud, mobile and open source computing, as well as an increase in the use and reliance on big data analytics are driving the growth of digital content. Factors contributing to this growth are the increased:

        As a result of these factors, the nature and amount of content being created requires increasingly higher storage capacity in order to store, manage, distribute, utilize and backup such content. This in turn has resulted in the rapid growth in demand for electronic data storage applications and solutions which we believe will continue to grow in developed countries as well as in emerging economies.

        Additionally, as the way electronic data is consumed continues to evolve with the proliferation of mobile devices and the growth of cloud computing, we also expect shifts in the manner that electronic data is stored. Accordingly, we expect that demand for electronic data storage in the enterprise and traditional non-compute markets will continue to grow.

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        We believe that continued growth in digital content requires increasingly higher storage capacity in order to store, aggregate, host, distribute, manage, backup and use such content. We also believe that as architectures evolve to serve the growing commercial and consumer user base throughout the world, the manner which hard drives are delivered to market and utilized by our customers will evolve as well.

        We believe that in the foreseeable future the traditional enterprise and client compute markets that require high capacity storage solutions, as well as the data intensive client non-compute markets, will continue to be best served by hard disk drives due to the industry's ability to deliver cost effective, reliable and energy efficient mass storage devices. Furthermore, the increased use of client non-compute devices that consume media rich content streamed from the cloud increases the demand for high capacity disk drives in nearline applications.

        From time to time the industry has experienced periods of imbalance between supply and demand. To the extent that the disk drive industry builds capacity based on expectations of demand that do not materialize, price erosion may become more pronounced. Conversely, during periods where demand exceeds supply, price erosion is generally muted.

Our Business

Disk Drive Technology

        The design and manufacturing of disk drives depends on highly advanced technology and manufacturing techniques and therefore requires high levels of research and development spending and capital equipment investments. Manufacturing our disk drives is a complex process that begins with the production of individual components and ends with a fully assembled disk drive. We design, fabricate and assemble a number of the most important components found in our disk drives, including read/write heads and recording media. Our design and manufacturing operations are based on technology platforms that are used to produce various disk drive products that serve multiple data storage applications and markets. Our core technology platforms are focused around the areal density of media and read/write head technologies. Using an integrated platform design and manufacturing leverage approach allows us to deliver a portfolio of disk drive products to service a wide range of electronic data storage applications and a wide range of industries.

        Disk drives that we manufacture are commonly differentiated by the following key characteristics:

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        Areal density is a measure of storage capacity per square inch on the recording surface of a disk. The storage capacity of a disk drive is determined by the number of disks it contains as well as the areal density capability of these disks. We have been pursuing, and will continue to pursue, a number of technologies to increase areal densities across the entire range of our products for expanding disk drive capacities and reducing the number of disks and heads per drive to further reduce product costs.

Manufacturing

        Vertically integrated hard drive manufacturers design and produce their own read/write heads and recording media, which are critical technologies for disk drives. This integrated approach enables manufacturers to lower costs and to improve the functionality of components so that they work together efficiently.

        We believe that because of our vertical design and manufacturing strategy, we are well suited to meet the challenges posed by the close interdependence of components for disk drives. Our manufacturing efficiency and flexibility are critical elements of our integrated business strategy. We continuously seek to improve our manufacturing efficiency and cost by:

        A vertically integrated model, however, tends to have less flexibility when demand moderates as it exposes us to higher unit costs as capacity utilization is not optimized.

        Due to the significant challenges posed by the need to continually innovate and improve manufacturing efficiency and the continued demands on capital and research and development investments required to do so, the disk drive industry has undergone significant consolidation as disk drive manufacturers and component manufacturers merged with other companies or exited the industry.

Components and Raw Materials

        Disk drives incorporate certain components, including a head disk assembly and a printed circuit board mounted to the head disk assembly, which are sealed inside a rigid base and top cover containing the recording components in a contamination controlled environment. We maintain a highly integrated approach to our business by designing and manufacturing a significant portion of the components we view as critical to our products, such as recording heads and media.

        Read/Write Heads.    The function of the read/write head is to scan across the disk as it spins, magnetically recording or reading information. The tolerances of recording heads are extremely demanding and require state-of-the-art equipment and processes. Our read/write heads are manufactured with thin-film and photolithographic processes similar to those used to produce semiconductor integrated circuits, though challenges in magnetic film properties and topographical structures are unique to the disk drive industry. We perform all primary stages of design and manufacture of read/write heads at our

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facilities. We use a combination of internally manufactured and externally sourced read/write heads, the mix of which varies based on product mix, technology and our internal capacity levels.

        Media.    Information is written to the media, or disk, as it rotates at very high speeds past the read/write head. The media is made from non-magnetic material, usually aluminum alloy or glass, and is coated with a thin layer of magnetic material. We use a combination of internally manufactured and externally sourced finished media and aluminum substrates, the mix of which varies based on product mix, technology and our internal capacity levels. We purchase all of our glass substrates from third parties, which we use in the disk drives we make for mobile products.

        Printed Circuit Board Assemblies.    The printed circuit board assemblies (PCBAs) are comprised of standard and custom ASICs and ancillary electronic control chips. The ASICs control the movement of data to and from the read/write heads and through the internal controller and interface, which communicates with the host computer. The ASICs and control chips form electronic circuitry that delivers instructions to a head positioning mechanism called an actuator to guide the heads to the selected track of a disk where the data is recorded or retrieved. Disk drive manufacturers use one or more industry standard interfaces such as serial advanced technology architecture (SATA); small computer system interface (SCSI); serial attached SCSI (SAS); or Fibre Channel (FC) to communicate to the host systems. We outsource to third parties the manufacture and assembly of the PCBAs used in our disk drives. We do not manufacture any ASICs, but we participate in their proprietary design.

        Head Disk Assembly.    The head disk assembly consists of one or more disks attached to a spindle assembly powered by a spindle motor that rotates the disks at a high constant speed around a hub. Read/write heads, mounted on an arm assembly, similar in concept to that of a record player, fly extremely close to each disk surface and record data on and retrieve it from concentric tracks in the magnetic layers of the rotating disks. The read/write heads are mounted vertically on an E-shaped assembly (E-block) that is actuated by a voice-coil motor to allow the heads to move from track to track. The E-block and the recording media are mounted inside the head disk assembly. We purchase spindle motors from outside vendors and from time to time participate in the design of the motors that go into our products. We use a combination of internally manufactured and externally sourced head disk assemblies.

        Disk Drive Assembly.    Following the completion of the head disk assembly, it is mated to the PCBA, and the completed unit goes through extensive defect mapping and testing prior to packaging and shipment. Disk drive assembly and test operations occur primarily at facilities located in China and Thailand. We perform subassembly and component manufacturing operations at our facilities in China, Malaysia, Northern Ireland, Singapore, Thailand and in the United States in Minnesota. In addition, third parties manufacture and assemble components and disk drive assemblies for us in various countries worldwide.

        Suppliers of Components and Industry Constraints.    There are a limited number of independent suppliers of components, such as recording heads and media, available to disk drive manufacturers. Vertically integrated disk drive manufacturers, who manufacture their own components, are less dependent on external component suppliers than less vertically integrated disk drive manufacturers.

        Commodity and Other Manufacturing Costs.    The production of disk drives requires rare earth elements, precious metals, scarce alloys and industrial commodities, which are subject to fluctuations in prices and the supply of which has at times been constrained. In addition to increased costs of components and commodities, volatility in fuel costs may also increase our costs related to commodities, manufacturing and freight. As a result, we may increase our use of ocean shipments to help offset any increase in freight costs.

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Products

        We offer a broad range of HDD's, SSHD's, and SSD's, for the enterprise, datacenter, client compute and client non-compute applications. We offer more than one product within each product category and differentiate products on the basis of price, performance, form factor, capacity, interface, power consumption efficiency, security features like full disk encryption and instant encryption key replacement through our Instant Erase technology, and other customer integration requirements. Our industry is characterized by continuous and significant advances in technology which contribute to rapid product life cycles. We list our main current product offerings below.

        Enterprise Performance Family.    Our 10,000 and 15,000 RPM Enterprise Performance Family disk drives feature increased throughput and improved energy efficiency, targeted at high random performance server application needs. Performance 10,000 RPM HDDs ship in storage capacities ranging from 300GB to 900GB, and our 15,000 RPM HDDs ship in storage capacities ranging from 146GB to 600GB.

        Enterprise Capacity HDD Family.    Our Enterprise Capacity disk drives ship in a 2.5-inch and 3.5-inch form factor and in storage capacities of up to 4TB that clock in at 7,200 RPM speeds. These products are designed for bulk data storage and server environments that require high capacity, enterprise reliability, energy efficiency and integrated security, SATA and SAS interfaces.

        Enterprise Value HDD Family.    Providing up to 3TB of SATA-based high capacity, 3.5-inch energy-efficient enterprise storage, the Enterprise Value hard disk drive offers low-cost bulk storage designed for vast amounts of unstructured data in the cloud. It features low power for energy efficient operations and ensures reliable operations in 24x7 multi-drive replicated environments.

        Seagate Terascale HDD Family.    Available in capacities up to 4TB in a 3.5-inch enterprise-class SATA hard drive, the Terascale HDD is designed to provide data centers with the storage scalability they need to meet demands in low workload, 24x7 replicated environments.

        We also ship SSHD and SSD enterprise solutions, including our Enterprise Turbo SSHD, 1200 SSD and 600 Pro SSD products. These products offer an alternative solution to HDDs, with higher speeds than traditional HDDs, and capacities of up to 800 GB.

        Laptop HDDs and SSHDs.    Our family of laptop drives ship in a variety of form factors (5mm to 9.5mm drive height), capacities (250GB to 1TB) and technologies (HDD and SSHD) to support mobile needs. Used in applications ranging from traditional laptops to tablets, our drives are built to address a range of performance needs and sizes for affordable, high capacity storage.

        Spinpoint SATA Mobile Family.    Our Spinpoint M8 2.5-inch mobile computing disk drives ship in 5,400 RPM, come in storage capacities of up to 1 TB, and continue to be produced under the Samsung brand name.

        Desktop HDD and SSHDs.    Our 3.5-inch family of desktop drives ship in both traditional HDD and SSHD configurations and offer up to 4TB. Desktop drives are designed for applications such as PCs, workstations and personal external storage devices.

        Video 3.5 and Video 2.5 HDDs.    We sell our 3.5 and 2.5-inch Video HDDs for use in video applications like DVR, media centers or gaming consoles. These disk drives are optimized for video

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streaming in always-on applications with capacities up to 4TB to support leading-edge digital entertainment.

        SV35: Surveillance HDDs.    Our surveillance drives are built to support the high-write workload of an always-on, always-recording video surveillance system. This surveillance optimized drive was built to support the growing needs of the surveillance market with support for multiple HD streams and capacities up to 3TB.

        We ship external backup storage solutions under our Backup Plus and Expansion product lines, as well as under the Samsung and LaCie brand names. These product lines utilize our 3.5-inch and 2.5-inch disk drives, which are available in capacities up to 4TB and 1TB, respectively. In addition, we ship the Wireless Plus wireless drive for use with secondary mobile devices utilizing a 2.5-inch 1TB drive. We also ship network attached storage (NAS) solutions under our Central and Business Storage product lines. These product lines utilize our 3.5-inch disk drives; our Central products are available in capacities up to 4TB, and our Business Storage products are available in capacities up to 16TB.

Customers

        We sell our products to major OEMs, distributors and retailers.

        The following table summarizes our revenue(1) by channel and by geography:

 
  Fiscal Years Ended  
 
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

Revenues by Channel (%)

                   

OEM

    68 %   72 %   69 %

Distributors

    21 %   21 %   22 %

Retail

    11 %   7 %   9 %

Revenues by Geography (%)

                   

Americas

    27 %   26 %   29 %

EMEA

    19 %   19 %   20 %

Asia Pacific

    54 %   55 %   51 %

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

        OEM customers typically enter into master purchase agreements with us. These agreements provide for pricing, volume discounts, order lead times, product support obligations and other terms and conditions including sales programs offered to promote selected products. Deliveries are scheduled only after receipt of purchase orders. In addition, with limited lead-time, customers may defer most purchase orders without significant penalty. Anticipated orders from many of our customers have in the past failed to materialize or OEM delivery schedules have been deferred or altered as a result of changes in their business needs.

        Our distributors generally enter into non-exclusive agreements for the resale of our products. They typically furnish us with a non-binding indication of their near-term requirements and product deliveries are generally scheduled accordingly. The agreements and related sales programs typically provide the distributors with limited right of return and price protection rights. In addition, we offer sales programs to distributors on a quarterly and periodic basis to promote the sale of selected products in the sales channel.

        Our retail channel consists of our branded storage products sold to retailers either by us directly or by our distributors. Retail sales made by us or our distributors typically require greater marketing support, sales incentives and price protection periods.

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        In fiscal years 2013, 2012 and 2011, Dell Inc. accounted for approximately 13%, 15% and 13% of consolidated revenue, respectively, while Hewlett-Packard Company accounted for approximately 10%, 14% and 15% of consolidated revenue, respectively. See "Item 1A. Risk Factors—Risks Related to Our Business— Dependence on Key Customers—We may be adversely affected by the loss of, or reduced, delayed or canceled purchases by, one or more of our larger customers."

Competition

        We compete primarily with manufacturers of hard drives used in the enterprise, client compute and client non-compute applications, but have in the past few years also competed with manufacturers of solid-state drives. The markets that we compete in are intensely competitive. Disk drive manufacturers not only compete for a limited number of major disk drive customers but also compete with other companies in the electronic data storage industry that provide alternative storage solutions, such as flash memory and SSDs. Some of the principal factors used by customers to differentiate among electronic data storage solutions manufacturers are storage capacity, product performance, product quality and reliability, price per unit and price per gigabyte, time-to-market and time-to-volume leadership, storage/retrieval access times, data transfer rates, form factor, product warranty and support capabilities, supply continuity and flexibility, warranty and brand. While different markets and customers place varying levels of emphasis on these factors, we believe that our products are competitive with respect to each of these factors in the markets that we currently address.

        Principal Disk Drive Competitors.    Following industry consolidation during fiscal year 2012, three disk drive companies remain:

        Other Competitors.    We also are experiencing competition from companies that provide alternative storage technologies such as flash memory and SSDs used in mobile applications such as tablets, notebooks and lower capacity hand held devices in addition to SSDs used in enterprise applications for rapid processing and high volume transactions. Additionally, we may in the future face indirect competition from customers who from time to time evaluate whether to offer electronic data storage products that may compete with our products.

        Price Erosion.    Historically, our industry has been characterized by price declines for disk drive products with comparable capacity, performance and feature sets ("like-for-like products"). Price declines for like-for-like products ("price erosion") have been more pronounced during periods of:

        Disk drive manufacturers typically attempt to offset price erosion with an improved mix of disk drive products characterized by higher capacity, better performance and additional feature sets and/or product cost reductions.

        Product Life Cycles and Changing Technology.    Success in our industry has been dependent to a large extent on the ability to balance the introduction and transition of new products with time-to-volume,

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performance, capacity and quality metrics at a competitive price, level of service and support that our customers expect. Generally those disk drive manufactures that are able to introduce new products first benefit from improved product mix, favorable profit margins and less pricing pressure until comparable products are introduced. Changing technology also necessitates on-going investments in research and development, which may be difficult to recover due to rapid product life cycles and economic declines. Further, there is a continued need to successfully execute product transitions and new product introductions, as factors such as quality, reliability and manufacturing yields become of increasing competitive importance.

Seasonality

        The disk drive industry traditionally experiences seasonal variability in demand with higher levels of demand in the second half of the calendar year. This seasonality is driven by consumer spending in the back-to-school season from late summer to fall and the traditional holiday shopping season from fall to winter.

Research and Development

        We are committed to developing new component technologies, products and alternative storage technologies. Our research and development focus is designed to bring new products to market in high volume, with quality attributes that our customers expect, before our competitors. Part of our product development strategy is to leverage a design platform and/or subsystem within product families to serve different market needs. This platform strategy allows for more efficient resource utilization, leverages best design practices, reduces exposure to changes in demand, and allows for achievement of lower costs through purchasing economies. Our advanced technology integration effort focuses disk drive and component research on recording subsystems, including read/write heads and recording media, market-specific product technology and technology focused towards new business opportunities. The primary purpose of our advanced technology integration effort is to ensure timely availability of mature component technologies to our product development teams as well as allowing us to leverage and coordinate those technologies in the design centers across our products in order to take advantage of opportunities in the marketplace. During fiscal years 2013, 2012 and 2011, we had product development expenses of approximately $1,133 million, $1,006 million and $875 million, respectively, which represented 8%, 7% and 8% of our consolidated revenue, respectively.

Patents and Licenses

        As of June 28, 2013, we had 5,570 U.S. patents and 1,965 patents issued in various foreign jurisdictions as well as 1,304 U.S. and 1,259 foreign patent applications pending. The number of patents and patent applications will vary at any given time as part of our ongoing patent portfolio management activity. Due to the rapid technological change that characterizes the electronic data storage industry, we believe that, in addition to patent protection, the improvement of existing products, reliance upon trade secrets, protection of unpatented proprietary know-how and development of new products are also important to our business in establishing and maintaining a competitive advantage. Accordingly, we intend to continue our efforts to broadly protect our intellectual property, including obtaining patents, where available, in connection with our research and development program.

        The electronic data storage industry is characterized by significant litigation relating to patent and other intellectual property rights. Because of rapid technological development in the electronic data storage industry, some of our products have been, and in the future could be, alleged to infringe existing patents of third parties. From time to time, we receive claims that our products infringe patents of third parties. Although we have been able to resolve some of those claims or potential claims by obtaining licenses or rights under the patents in question without a material adverse affect on us, other claims have resulted in adverse decisions or settlements. In addition, other claims are pending, which if resolved

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unfavorably to us could have a material adverse effect on our business and results of operations. For more information on these claims, see "Item 8. Financial Statements and Supplementary Data—Note 14, Legal, Environmental, and Other Contingencies." The costs of engaging in intellectual property litigation in the past have been, and in the future may be, substantial, irrespective of the merits of the claim or the outcome. We have patent licenses with a number of companies. Additionally, as part of our normal intellectual property practices, we may be engaged in negotiations with other major electronic data storage companies and component manufacturers with respect to patent licenses.

Backlog

        In view of industry practice, whereby customers may cancel or defer orders with little or no penalty, we believe backlog in the disk drive industry is of limited indicative value in estimating future performance and results.

Environmental Matters

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

        We have established environmental management systems and continually update environmental policies and standard operating procedures for our operations worldwide. We believe that our operations are in material compliance with applicable environmental laws, regulations and permits. We budget for operating and capital costs on an ongoing basis to comply with environmental laws. If additional or more stringent requirements are imposed on us in the future, we could incur additional operating costs and capital expenditures.

        Some environmental laws, such as the Comprehensive Environmental Response Compensation and Liability Act of 1980 (as amended, the "Superfund" law) and its state equivalents, can impose liability for the cost of cleanup of contaminated sites upon any of the current or former site owners or operators or upon parties who sent waste to these sites, regardless of whether the owner or operator owned the site at the time of the release of hazardous substances or the lawfulness of the original disposal activity. We have been identified as a potentially responsible party at several sites. At each of these sites, we have an assigned portion of the financial liability based on the type and amount of hazardous substances disposed of by each party at the site and the number of financially viable parties. We have fulfilled our responsibilities at some of these sites and remains involved in only a few at this time.

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

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

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Employees

        At June 28, 2013, we employed approximately 53,200 employees and temporary employees worldwide, of which approximately 45,000 employees were located in our Asian operations. We believe that our future success will depend in part on our ability to attract and retain qualified employees at all levels. We believe that our employee relations are good.

Financial Information

        Financial information for our reportable business segment and about geographic areas is set forth in "Item 8. Financial Statements and Supplementary Data—Note 13, Business Segment and Geographic Information."

Corporate Information

        On July 3, 2010, we consummated our previously announced reorganization pursuant to which Seagate Technology public limited company, a public limited company organized under the laws of Ireland, became the publicly traded parent of the Seagate corporate family. Prior to the reorganization our publicly traded parent was Seagate Technology, an exempted company incorporated with limited liability under the laws of the Cayman Islands.

Available Information

        Availability of Reports.    We are a reporting company under the Securities Exchange Act of 1934, as amended (the "1934 Exchange Act"), and we file reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the "SEC"). The public may read and copy any of our filings at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Because we make filings to the SEC electronically, the public may access this information at the SEC's website: www.sec.gov. This site contains reports, proxies and information statements and other information regarding issuers that file electronically with the SEC.

        Web Site Access.    Our website is www.seagate.com. We make available, free of charge at the "Investors" section of our website, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 1934 Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the 1934 Exchange Act are also available on our web site. Information in, or that can be accessed through, our web site is not incorporated into this Form 10-K.

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Executive Officers

        The following sets forth the name, age and position of each of the persons who were serving as executive officers as of August 7, 2013. There are no family relationships among any of our executive officers.

Name
  Age   Positions

Stephen J. Luczo

    56   Chairman, President and Chief Executive Officer

Patrick J. O'Malley

    51   Executive Vice President, Chief Financial Officer

Kenneth M. Massaroni

    52   Executive Vice President, General Counsel and Chief Administrative Officer

William D. Mosley

    46   Executive Vice President, Operations

Albert A. "Rocky" Pimentel

    57   Executive Vice President, Chief Sales and Marketing Officer

D. Kurt Richarz

    52   Executive Vice President, Sales

Mark Re

    53   Senior Vice President, Chief Technology Officer

Douglas DeHaan

    55   General Manager, Samsung HDD Brand of Products

David H. Morton Jr. 

    41   Vice President, Finance, Treasurer and Principal Accounting Officer

        Stephen J. Luczo, Chairman, President and Chief Executive Officer. Mr. Luczo, 56, has served as President and CEO since January 2009, and continues to serve as Chairman of the Board. Mr. Luczo joined Seagate in October 1993 as Senior Vice President of Corporate Development. In September 1997, he was promoted to President and Chief Operating Officer of our predecessor, Seagate Technology, Inc. and, in July 1998, he was promoted to CEO at which time he joined the Board of Directors of Seagate Technology, Inc. He was appointed Chairman of the Board in 2002. Mr. Luczo resigned as CEO effective as of July 3, 2004, but retained his position as Chairman of the Board. He served as non-employee Chairman from October 2006 to January 2009. From October 2006 until he rejoined us in January 2009, Mr. Luczo was a private investor. Prior to joining Seagate in 1993, Mr. Luczo was Senior Managing Director of the Global Technology Group of Bear, Stearns & Co. Inc., an investment banking firm, from February 1992 to October 1993. Mr. Luczo was appointed to the board of directors of Microsoft Corporation in May 2012.

        Patrick J. O'Malley, Executive Vice President and Chief Financial Officer. Mr. O'Malley, 51, has served as Executive Vice President and Chief Financial Officer since August 2008. Previously, he served as Senior Vice President, Finance from 2005 to August 2008, and assumed the additional roles of Principal Accounting Officer and Treasurer in 2006. Prior to that, he was Senior Vice President, Consumer Electronics from 2004 to 2005; Senior Vice President, Finance, Manufacturing from 1999 to 2004; Vice President, Finance-Recording Media from 1997 to 1999; Senior Director Finance, Desktop Design, from 1996 to 1997; Senior Director, Finance, Oklahoma City Operations from 1994 to 1996; Director/Manager, Corporate Financial Planning & Analysis from 1991 to 1994; Manager, Consolidations & Cost Accounting from 1990 to 1991; Manager, Consolidations from 1988 to 1990; and Senior Financial Analyst in 1988. Mr. O'Malley was appointed to the board of directors of E2open, Inc. in January 2012.

        Kenneth M. Massaroni, Executive Vice President, General Counsel and Chief Administrative Officer. Mr. Massaroni, 52, was appointed Executive Vice President, General Counsel and Chief Administrative Officer in July 2011. Prior to that, he served as Senior Vice President, General Counsel and Corporate Secretary from April 2008 through July 2011; Vice President and Acting General Counsel from December 2007 to April 2008; and Vice President of Intellectual Property from 2006 to December 2007. Prior to joining Seagate in 2006, Mr. Massaroni was vice president of law, deputy general counsel and assistant secretary at Scientific-Atlanta Inc. from 1997 to 2006. In addition, Mr. Massaroni has also held senior patent counsel positions at Motorola Inc. from 1993 to 1997, served as general counsel and secretary at Optical Imaging Systems, Inc. from 1990 to 1992 and as a patent attorney at Energy Conversion

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Devices Inc. from 1987 to 1990, and as an associate at the law firm of Collier, Shannon, Rill and Scott from 1992 to 1993.

        William D. Mosley, Executive Vice President, Operations. Mr. Mosley, 46, has served as Executive Vice President, Operations since March 2011. Prior to that, he served as Executive Vice President, Sales and Marketing from September 2009 through March 2011; Executive Vice President, Sales, Marketing and Product Line Management from February 2009 to September 2009; Senior Vice President, Global Disk Storage Operations from 2007 to 2009; Vice President, Research and Development, Engineering from 2002 to 2007; Senior Director, Research and Development, Engineering from 2000 to 2002; Director, Research and Development, Engineering from 1998 to 2000; and Manager, Operations and Manufacturing from 1996 to 1998.

        Albert A. "Rocky" Pimentel, Executive Vice President, Worldwide Sales and Marketing. Mr. Pimentel, 57, joined Seagate in April 2011. Mr. Pimentel was previously a director of Seagate from 2009 until his resignation from the Board of Directors on April 7, 2011. Mr. Pimentel served as Chief Operating Officer and Chief Financial Officer ("CFO") at McAfee, Inc., from 2008 until he retired in August 2010. He served as the Executive Vice President and CFO of Glu Mobile from 2004 to 2008. Prior to joining Glu Mobile, Mr. Pimentel served as Executive Vice President and CFO at Zone Labs from 2003 to 2004, which was acquired by Check Point Software in 2004. From 2001 to 2003, Mr. Pimentel was a partner with Redpoint Ventures. Mr. Pimentel also held the positions of Senior Vice President and CFO of WebTV Networks, which was acquired by Microsoft in 1997; from 1996 until 2001, Senior Vice President and CFO of LSI Logic Corporation from 1992 to 1996 and was part of the founding management team of Conner Peripherals, Inc., which was acquired by the Company in 1996.

        D. Kurt Richarz, Executive Vice President, Sales and Marketing. Mr. Richarz, 52, joined Seagate in May 2006, when we acquired Maxtor Corporation. He has served as our Executive Vice President, Sales and Marketing since March 2011. Prior to that, he served as our Executive Vice President, Sales from May 2008 through March 2011; Executive Vice President, Sales and Customer Service Operations since from May 2006 to May 2008; Senior Vice President of Global OEM Sales from 2007 to 2008, and Vice President of Global OEM Sales from 2006 to 2007. At Maxtor Corporation, from 2002 to 2006, he served as Vice President, Global OEM Account Sales and Senior Vice President of Worldwide Sales. From 1990 to 2001, he served in various sales positions at Quantum Corporation.

        Mark Re, Senior Vice President, Chief Technology Officer. Mr. Re, 53, joined Seagate in August 2003 and has served as Senior Vice President, Research and Development, since July 2013. Prior to that, he served as Vice President, Research, from August 2003 to August 2006; Senior Vice President, Research, from August 2006 to March 2009; Senior Vice President, Recording Media Operations, from March 2009 to March 2011; and Senior Vice President, Recording Media and Heads Research and Development. Mr. Re also served as Senior Vice President, Research and Development at Read Rite Corporation from 1998 to 2003. Mr. Re currently serves on the Scientific Advisory Board for the Data Storage Institute, as well as on the Pittsburgh Technology Council and the Advanced Storage Technology Consortium.

        Douglas DeHaan, General Manager, Samsung HDD Brand of Products. Mr. DeHaan, 55, has been General Manager, Samsung HDD Products since September 2012. Prior to that, he served as Senior Vice President, Operations and Materials, from February 2009 until September 2012; Senior Vice President of Quality from 2008 to 2009; Senior Vice President of Product and Process Development, Core Products, from 2003 to 2008; Senior Vice President, Process Development and Product Launch, from 2001 to 2003; Vice President, Seagate Factory of the Future Initiative, from 1999 to 2001; Vice President, Twin Cities Manufacturing Operations, from 1996 to 1999; Vice President, Singapore Operations, from 1994 to 1996; and Senior Director, Manufacturing Engineering/Twin Cities Operations, from 1992 to 1994.

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        David H. Morton Jr., Vice President, Finance, Treasurer and Principal Accounting Officer. Mr. Morton, 41, joined Seagate in 1995 and has served as our Vice President, Finance, Treasurer and Principal Accounting Officer since October 2009. Prior to that, he served as our Vice President of Finance, Sales and Marketing from March 2009 to October 2009; Vice President of Sales Operations from July 2007 to March 2009; Vice President of Finance, Storage Markets from October 2006 to July 2007; Executive Director of Consumer Electronics Finance from October 2005 to October 2006; and Executive Director of Corporate FP&A from June 2004 to October 2005. Prior to June 2004, Mr. Morton held a variety of progressively senior management positions within our finance organization.

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ITEM 1A.    RISK FACTORS

Risks Related to our Business

Macroeconomic Conditions—Changes in the macroeconomic environment have, and may continue to, negatively impact our results of operations.

        Due to the continuing uncertainty about current macroeconomic conditions affecting consumer and enterprise spending, we believe our customers may postpone spending in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values, which could have a material adverse effect on the demand for our products. Continuing high unemployment rates, low levels of consumer liquidity, risk of default on sovereign debt and volatility in credit and equity markets have weakened consumer confidence and decreased consumer and enterprise spending in many regions around the world. Other factors that could influence demand include conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for our products and on our financial condition and operating results.

Competition—Our industry is highly competitive and our products have experienced and may continue to experience significant price erosion and market share variability.

        The disk drive industry is intensely competitive and vendors have typically experienced substantial price erosion over the life of a product. Our competitors have historically offered existing products at lower prices as part of a strategy to gain or retain market share and customers. Should these practices continue, we may need to continually reduce our prices for existing products to retain our market share, which could adversely affect our results of operations.

        While recent slowing areal density improvements and longer product lifecycles have necessitated that hard drive manufacturers reduce engagement in aggressive pricing tactics that have historically led to increased price erosion, we believe that industry price erosion and market share may remain volatile should the industry engage in aggressive pricing actions targeted to shift customer demand.

        Sales to distributors that serve producers of non-branded products in the personal storage sector may also contribute to increased price erosion. These customers generally have limited product qualification programs, which increases the number of competing products available to satisfy their demand. As a result, purchasing decisions for these customers are based largely on price and terms. Any increase in our average price erosion would have an adverse effect on our results of operations.

        Additionally, a significant portion of our success in the past has been a result of increasing our market share at the expense of our competitors, particularly in enterprise markets. Market share for our products can be negatively affected by our customers' diversifying their sources of supply as our competitors enter the market for particular products, as well as by our ability to ramp volume production of new product offerings. When our competitors successfully introduce product offerings that are competitive with our recently introduced products, our customers may quickly diversify their sources of supply. Any significant decline in our market share in any of our principal market applications would adversely affect our results of operations.

Principal Competitors—We compete with both an independent manufacturer, whose primary focus is producing technologically advanced disk drives, and a captive manufacturer, who does not depend solely on sales of disk drives to maintain its profitability.

        We have experienced and expect to continue to experience intense competition from an independent disk drive manufacturer, and a captive manufacturer. The term "independent" in this context refers to manufacturers that primarily produce disk drives as a stand-alone product, such as Western Digital

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Corporation, and the term "captive" in this context refers to a manufacturer who through affiliated entities produces complete computer or other systems that contain disk drives or other electronic data storage products, such as Toshiba Corporation.

        The captive manufacturer is a formidable competitor because it has the ability to determine pricing for complete systems without regard to the margins on individual components. As components other than disk drives generally contribute a greater portion of the operating margin on a complete computer system than do disk drives, the captive manufacturer does not necessarily need to realize a profit on the disk drives included in a complete computer system and, as a result, may be willing to sell disk drives to third parties at very low margins. The captive manufacturer is also a formidable competitor because it has more substantial resources than we do. To the extent we are not successful competing with the captive or independent disk drive manufacturers, our results of operations will be adversely affected.

        In response to customer demand for high-quality, high-volume and low-cost disk drives, manufacturers of disk drives have had to develop large, and in some cases global, production facilities with highly developed technological capabilities and internal controls. The development of these large production facilities combined with industry consolidation can further increase the intensity of competition.

        We also face indirect competition from present and potential customers who evaluate from time to time whether to manufacture their own disk drives or other electronic data storage products that may compete with our products.

        We also experience competition from other companies that produce alternative storage technologies like flash memory, where increasing capacity, decreasing cost, energy efficiency and improvements in performance ruggedness have resulted in competition with our lower capacity, smaller form factor disk drives. While this competition has traditionally been in the markets for handheld consumer electronics applications, these competitors have announced solid state drives (SSDs) for tablet, notebook and enterprise compute applications. Certain customers for both notebook and enterprise compute applications are adopting SSDs as alternatives to hard drives in certain applications.

Volatility of Quarterly Results—Our quarterly results of operations fluctuate, sometimes significantly, from period to period, and may cause our share price to decline.

        In the past, our quarterly revenue and results of operations have fluctuated, sometimes significantly, from period to period. These fluctuations, which we expect to continue, may be occasioned by a variety of factors, including:

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        As a result, we believe that quarter-to-quarter comparisons of our revenue and results of operations may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance. Our results of operations in one or more future quarters may fail to meet the expectations of investment research analysts or investors, which could cause an immediate and significant decline in the trading price of our ordinary shares.

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

        The disk drive industry operates on quarterly purchasing cycles, with much of the order flow in any given quarter typically coming at the end of that quarter. Our manufacturing process requires us to make significant product-specific investments in inventory in each quarter for that quarter's production. Since we typically receive the bulk of our orders late in a quarter after we have made our investments, there is a risk that our orders will not be sufficient to allow us to recapture the costs of our investment before the products resulting from that investment have become obsolete. We cannot assure you that we will be able to accurately predict demand in the future.

        The difficulty in forecasting demand also increases the difficulty in anticipating our inventory requirements, which may cause us to over-produce finished goods, resulting in inventory write-offs, or under-produce finished goods, affecting our ability to meet customer requirements. Additionally, the risk of inventory write-offs could increase if we were to continue to hold higher inventory levels. We cannot be certain that we will be able to recover the costs associated with increased inventory.

        Other factors that may negatively impact our ability to recapture the cost of investments in any given quarter include:

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

        We are continually developing new products with the goal that we will be able to introduce technologically advanced and lower cost disk drives into the marketplace ahead of our competitors.

        The success of our new product introductions is dependent on a number of factors, including market acceptance, our ability to manage the risks associated with product transitions, the effective management of inventory levels in line with anticipated product demand and the risk that our new products will have quality problems or other defects in the early stages of introduction that were not anticipated in the design of those products. Accordingly, we cannot accurately determine the ultimate effect that our new products will have on our results of operations.

        In addition, the success of our new product introductions is dependent upon our ability to qualify as a primary source of supply with our OEM customers. In order for our products to be considered by our customers for qualification, we must be among the leaders in time-to-market with those new products. Once a product is accepted for qualification testing, any failure or delay in the qualification process or a requirement that we requalify can result in our losing sales to that customer until new products are introduced. The limited number of high-volume OEMs magnifies the effect of missing a product qualification opportunity. These risks are further magnified because we expect competitive pressures to result in declining sales, eroding prices, and declining gross margins on our current generation products. We cannot assure that we will be among the leaders in time-to-market with new products or that we will be able to successfully qualify new products with our customers in the future.

        If we cannot successfully deliver competitive products, our future results of operations may be adversely affected.

Smaller Form Factor Products—If we do not continue to successfully market smaller form factor products, our business may suffer.

        The disk drive industry is experiencing significant increases in sales of smaller form factor disk drives or other electronic data storage technologies for an expanding number of applications, in particular notebook computers and consumer electronic devices, but also in personal computers and enterprise storage applications. Our future success will depend on our ability to develop and introduce smaller form factor products at desired price and capacity points faster than our competitors.

        We have experienced competition from other companies that produce alternative storage technologies like solid state or flash memory, where increased capacity, improving cost, energy efficiency and

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performance ruggedness have resulted in flash memory largely replacing disk drives in handheld applications. We believe that the demand for disk drives to store or back up related media content from such handheld devices, however, continues to grow. While this competition has traditionally been limited to the markets for handheld consumer electronics applications, these competitors have announced SSDs for tablet, notebook and enterprise compute applications.

        If we do not suitably adapt our product offerings to successfully introduce additional smaller form factor disk drives or alternative storage products based on flash storage technology, or if our competitors are successful in achieving customer acceptance of SSD products for tablet, notebook and enterprise compute applications, then our customers may decrease the amounts of our products that they purchase, which would adversely affect our results of operations.

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

        The cost, quality and supply of components, certain equipment and raw materials used to manufacture disk drives and key components like recording media and heads are critical to our success. The equipment we use to manufacture our products and components is frequently custom made and comes from a few suppliers and the lead times required to obtain manufacturing equipment can be significant. Particularly important components for disk drives include read/write heads, aluminum or glass substrates for recording media, ASICs, spindle motors, printed circuit boards, and suspension assemblies. We rely on sole suppliers or a limited number of suppliers for some of these components that we do not manufacture, including aluminum and glass substrates, read/write heads, ASICs, spindle motors, printed circuit boards, and suspension assemblies. Many of such component suppliers are geographically concentrated, in particular, in Thailand, which makes our supply chain more vulnerable to regional disruptions such as the recent flooding in Thailand, which has had a material impact on the production and availability of many components. If our vendors for these components are unable to meet our cost, quality, and supply requirements, we could experience a shortage in supply or an increase in production costs, which would adversely affect our results of operations.

        Certain rare earth elements are critical in the manufacture of our products. We purchase components that contain rare earth elements from a number of countries, including the People's Republic of China. We cannot predict whether any nation will impose regulations, quotas or embargoes upon the rare earth elements incorporated into our products that would restrict the worldwide supply of such metals or increase their cost. We have experienced increased costs and production delays when we were unable to obtain the necessary equipment or sufficient quantities of some components, and/or have been forced to pay higher prices or make volume purchase commitments or advance deposits for some components, equipment or raw materials that were in short supply in the industry in general. If any major supplier were to restrict the supply available to us or increase the cost of the rare earth elements used in our products, we could experience a shortage in supply or an increase in production costs, which would adversely affect our results of operations.

        Consolidation among component manufacturers may result in some component manufacturers exiting the industry or not making sufficient investments in research to develop new components.

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

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

Importance of Time-to-Maturity—Our results of operations may depend on our being among the first-to-maturity with new product offerings and achieving sufficient production volume with our new products.

        To achieve consistent success with our OEM customers, it is important that we be an early provider of new types of disk drives featuring leading, high-quality technology and lower per gigabyte storage cost. Historically, our results of operations have substantially depended upon our ability to be among the first-to-maturity with new product offerings. Our market share and results of operations in the future may be adversely affected if we fail to:

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

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

Industry Demand—Poor global economic conditions and changes in demand for computer systems and storage subsystems may cause in the future a decline in demand for our products.

        Our disk drives are components in computers, computer systems, storage subsystems and consumer electronics devices. The demand for these products has been volatile. During times of poor global economic conditions, consumer spending tends to decline and retail demand for personal computers and consumer electronics devices tends to decrease, as does enterprise demand for computer systems and storage subsystems. Moreover, unexpected slowdowns in demand for computer systems, storage subsystems or consumer electronics devices generally cause sharp declines in demand for disk drive products. The decline in consumer spending could have a material adverse effect on demand for our products and services and on our financial condition and results of operations.

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

Dependence on Distributors—We are dependent on sales to distributors and retailers, which may increase price erosion and the volatility of our sales.

        A substantial portion of our sales has been to distributors of disk drive products. Certain of our distributors may also market other products that compete with our products. Product qualification programs in this distribution channel are limited, which increases the number of competing products that are available to satisfy demand, particularly in times of lengthening product cycles. As a result, purchasing decisions in this channel are based largely on price, terms and product availability. Sales volumes through this channel are also less predictable and subject to greater volatility than sales to our OEM customers. In addition, deterioration in business and economic conditions could exacerbate price erosion and volatility as distributors lower prices to compensate for lower demand and higher inventory levels. Our distributors' ability to access credit for purposes of funding their operations may also affect purchases of our products by these customers.

        If distributors reduce their purchases of our products or prices decline significantly in the distribution channel or if distributors experience financial difficulties or terminate their relationships with us, our revenues and results of operations would be adversely affected.

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

        Some of our key customers account for a large portion of our disk drive revenue. While we have longstanding relationships with many of our customers, if any of our key customers were to significantly reduce their purchases from us, our results of operations would be adversely affected. While sales to major customers may vary from period to period, a major customer that permanently discontinues or significantly reduces its relationship with us could be difficult to replace. In line with industry practice, new customers usually require that we pass a lengthy and rigorous qualification process at the customer's cost. Accordingly, it may be difficult or costly for us to attract new major customers. Additionally, mergers, acquisitions, consolidations or other significant transactions involving our customers generally entail risks to our business. If a significant transaction involving any of our key customers results in the loss of or reduction in purchases by these key customers, it could have a materially adverse effect on our business, results of operations, financial condition and prospects.

Dependence on Sales of Disk Drives in Client Non-Compute Applications—Our sales of disk drives for client non-compute applications, which have contributed significant revenues to our results, can experience significant volatility due to seasonal and other factors, which could materially adversely impact our future results of operations.

        Sales of disk drives for client non-compute applications have contributed significant revenues to our results. Consumer spending on client non-compute has, and may continue to, deteriorate in many countries and regions, due to poor global economic conditions and high levels of unemployment. This could have a material adverse effect on demand for our products and services and on our financial condition and results of operations.

        In addition, the demand for client non-compute products can be even more volatile and unpredictable than the demand for client compute products. In some cases, our products manufactured for client non-compute applications are uniquely configured for a single customer's application, which creates a risk

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of unwanted and unsellable inventory if the anticipated volumes are not realized. This potential for unpredictable volatility is increased by the possibility of competing alternative storage technologies like flash memory meeting the customers' cost and capacity metrics, resulting in a rapid shift in demand from our products and disk drive technology, generally, to alternative storage technologies. Unpredictable fluctuations in demand for our products or rapid shifts in demand from our products to alternative storage technologies in new client non-compute applications could materially adversely impact our future results of operations.

Dependence on Sales of Disk Drives Directly to Consumers Through Retail Outlets—Our sales of disk drives directly to consumers through retail outlets can experience significant volatility due to seasonal and other factors, which could materially adversely impact our future results of operations.

        We believe that industry demand for storage products in the long-term is increasing due to the proliferation of media-rich digital content in consumer applications and is fueling increased consumer demand for storage. This has led to the expansion of solutions such as external storage products to provide additional storage capacity and to secure data in case of disaster or system failure, or to provide independent storage solutions for multiple users in home or small business environments. Consumer spending on retail sales of our branded solutions has deteriorated in some markets and may continue to do so if poor global economic conditions continue and higher levels of unemployment persist. This could have a material adverse effect on demand for our products and services and on our financial condition and results of operations.

        In addition, such retail sales of our branded solutions traditionally experience seasonal variability in demand with higher levels of demand in the first half of our fiscal year driven by consumer spending in the back-to-school season from late summer to fall and the traditional holiday shopping season from fall to winter. Additionally, our ability to reach such consumers depends on our maintaining effective working relationships with major retailers and distributors. Failure to anticipate consumer demand for our branded solutions as well as an inability to maintain effective working relationships with retail and online distributors may adversely impact our future results of operations.

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

        Our strategy involves, to a substantial degree, increasing revenue and product volume while at the same time controlling operating expenses. If we do not control our operating expenses, our ability to compete in the marketplace may be impaired. In the past, activities to reduce operating costs have included closures and transfers of facilities, significant personnel reductions and efforts to increase automation. The reduction of personnel and closure of facilities may adversely affect our ability to manufacture our products in required volumes to meet customer demand and may result in other disruptions that affect our products and customer service.

Impairment Charges—We may be required to record impairment charges for goodwill and/or other long-lived assets.

        We are required to assess goodwill annually for impairment, or on an interim basis whenever events occur or circumstances change, such as an adverse change in business climate or a decline in the overall industry, that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We are also required to test other long-lived assets, including acquired intangible assets and property, equipment and leasehold improvements, for recoverability and impairment whenever there are indicators of impairment, such as an adverse change in business climate.

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        Adverse changes in business conditions could materially impact our estimates of future operations and result in impairment charges to our goodwill or other long lived assets. If our goodwill or other long-lived assets were to become impaired, our results of operations could be materially and adversely affected.

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

        The rate of increase in areal density, or storage capacity per square inch on a disk, may be greater than the increase in our customers' demand for aggregate storage capacity, particularly in certain market applications like client compute. As a result, our customers' storage capacity needs may be satisfied with lower priced, low capacity disk drives. These factors could decrease our sales, especially when combined with continued price erosion, which could adversely affect our results of operations.

Changes in Electronic Data Storage Products—Future changes in the nature of electronic data storage products may reduce demand for traditional disk drive products.

        We expect that in the future, new personal computing devices and products will be developed, some of which, such as Internet appliances, tablet or mobile phones with advanced capabilities, or smartphones, may not contain a disk drive. While we are investing development resources in designing disk drives for these new applications, these new applications may have an impact on future demand for disk drive products. Products using alternative technologies, such as flash memory and other storage technologies, are becoming increasingly common and could become a significant source of competition to particular applications of our products, which could adversely affect our results of operations.

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

        Our customers have demanded new generations of disk drive products as advances in computer hardware and software have created the need for improved storage products, with features such as increased storage capacity, improved performance and reliability and lower cost. We, and our competitors, have developed improved products, and we will need to continue to do so in the future. Such product development requires significant investments in research and development. We cannot assure you that we will be able to successfully complete the design or introduction of new products in a timely manner, that we will be able to manufacture new products in sufficient volumes with acceptable manufacturing yields, that we will be able to successfully market these new products or that these products will perform to specifications on a long-term basis. In addition, the impact of slowing areal density growth may adversely impact our ability to be successful.

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

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

        We are leveraged and have significant debt service obligations. Our significant debt and debt service requirements could adversely affect our ability to operate our business and may limit our ability to take

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advantage of potential business opportunities. For example, our high level of debt presents the following risks:

        In the event that we need to refinance all or a portion of our outstanding debt as it matures, we may not be able to obtain terms as favorable as the terms of our existing debt or refinance our existing debt at all. If prevailing interest rates or other factors existing at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced debt would increase. Furthermore, if any rating agency changes our credit rating or outlook, our debt and equity securities could be negatively affected, which could adversely affect our ability to refinance existing debt or raise additional capital.

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

        Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness or to fund our other liquidity needs, including working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances and other general corporate requirements.

        Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that:

        If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures; product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit us to meet our scheduled debt service obligations. In addition if we incur additional debt, the risks associated with our substantial leverage, including the risk that we will be unable to service our debt or generate enough cash flow to fund our liquidity needs, could intensify.

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Failure to Pay Quarterly Dividends—Our failure to pay quarterly dividends to our shareholders could cause the market price of our ordinary shares to decline significantly.

        Our ability to pay quarterly dividends will be subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements, and other factors. Any reduction or discontinuation of quarterly dividends could cause the market price of our ordinary shares to decline significantly. Moreover, in the event our payment of quarterly dividends is reduced or discontinued, our failure or inability to resume paying dividends at historical levels could result in a persistently low market valuation of our ordinary shares.

Purchase Commitments to Certain Suppliers—If revenues fall or customer demand decreases significantly, we may not meet all of our purchase commitments to certain suppliers.

        From time to time, we enter into long-term, non-cancelable purchase commitments with certain suppliers in order to secure certain components for the production of our products or to supplement our internal manufacturing capacity for certain components. If our actual revenues in the future are lower than our projections or if customer demand decreases significantly below our projections, we may not meet all of our purchase commitments with these suppliers. As a result, it is possible that we will have to shift output from our internal manufacturing facilities to these suppliers or make penalty-type payments under these contracts.

Risks Associated with Future Strategic Alliances, Joint Ventures or Investments—We may not be able to identify suitable strategic alliances, acquisitions, joint ventures or investment opportunities, or successfully acquire and integrate companies that provide complementary products or technologies.

        Our growth strategy may involve pursuing strategic alliances with, making acquisitions of, forming joint ventures with or making investments in other companies that are complementary to our business. There is substantial competition for attractive strategic alliance, acquisition, joint venture and investment candidates. Accordingly, we may not be able to identify suitable strategic alliances, acquisition, joint venture, or investment candidates. Even if we can identify them, we cannot assure you that we will be able to partner with, acquire or invest in suitable candidates, or integrate acquired technologies or operations successfully into our existing technologies and operations. Moreover, our ability to finance potential strategic alliances, acquisitions, joint ventures or investments will be limited by our high degree of leverage, the covenants contained in the indentures that govern our outstanding indebtedness, and any agreements governing any other debt we may incur.

        If we are successful in forming strategic alliances or acquiring, forming joint ventures or making investments in other companies, any of these transactions may have an adverse effect on our results of operations, particularly while the operations of an acquired business are being integrated. It is also likely that integration of acquired companies would lead to the loss of key employees from those companies or the loss of customers of those companies. In addition, the integration of any acquired companies would require substantial attention from our senior management, which may limit the amount of time available to be devoted to our day-to-day operations or to the execution of our strategy. Growth by strategic alliance, acquisition, joint venture or investment involves an even higher degree of risk to the extent we combine new product offerings and enter new markets in which we have limited experience, and no assurance can be given that acquisitions of entities with new or alternative business models will be successfully integrated or achieve their stated objectives.

        Furthermore, the expansion of our business involves the risk that we might not manage our growth effectively, that we would incur additional debt to finance these acquisitions or investments, that we may have impairment of goodwill or acquired intangible assets associated with these acquisitions and that we would incur substantial charges relating to the write-off of in-process research and development, similar to

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that which we incurred in connection with several of our prior acquisitions. Each of these items could have a material adverse effect on our financial condition and results of operations.

        In addition, we could issue additional ordinary shares in connection with future strategic alliances, acquisitions, joint ventures or investments. Issuing shares in connection with such transactions would have the effect of diluting your ownership percentage of the ordinary shares and could cause the price of our ordinary shares to decline.

Risk of Intellectual Property Litigation—We are at times subject to intellectual property legal proceedings and claims which could which could cause us to incur significant additional costs or prevent us from selling our products, and which could adversely affect our results of operations and financial condition.

        We are subject from time-to-time to legal proceedings and claims, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us, or our customers, in connection with their use of our products. Intellectual property litigation can be expensive and time-consuming, regardless of the merits of any claim, and could divert our management's attention from operating our business. In addition, intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, which may cause actual results to differ materially from our expectations. Patent litigation has increased due to the current uncertainty of the law and the increasing competition and overlap of product functionality in the field. Some of the actions that we face from time-to-time seek injunctions against the sale of our products and/or substantial monetary damages, which if granted or awarded, could materially harm our business, financial condition and operating results.

        We cannot be certain that our products do not and will not infringe issued patents or other intellectual property rights of others. We may not be aware of currently filed patent applications that relate to our products or technology. If patents are later issued on these applications, we may be liable for infringement. If our products were found to infringe the intellectual property rights of others, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products in one or more geographic locations, expend significant resources to develop non-infringing technology, discontinue the use of specific processes or obtain licenses to the technology infringed. We might not be able to obtain the necessary licenses on acceptable terms, or at all, or be able to reengineer our products successfully to avoid infringement. Any of the foregoing could cause us to incur significant costs and prevent us from selling our products, which could adversely affect our results of operations and financial condition. See Part II, "Item 8. Financial Statements and Supplementary Data—Note 14, Legal, Environmental and Other Contingencies" of this Annual Report on Form 10-K for a description of pending intellectual property proceedings.

Protection of our Intellectual Property—We may be unable to protect our intellectual property rights, which could adversely affect our business, financial condition and results of operations.

        We rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality procedures and licensing arrangements to protect our IP rights. In the past, we have been involved in significant and expensive disputes regarding our IP rights and those of others, including claims that we may be infringing patents, trademarks and other IP rights of third-parties. We expect that we will be involved in similar disputes in the future.

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        There can be no assurance that:

        In addition, our competitors may be able to design their products around our patents and other proprietary rights. Enforcement of our rights often requires litigation. If we bring a patent infringement action and are not successful, our competitors would be able to use similar technology to compete with us. Moreover, the defendant in such an action may successfully countersue us for infringement of their patents or assert a counterclaim that our patents are invalid or unenforceable.

Cyber Attacks, System Failures and Breaches—We could suffer a loss of revenue and increased costs, exposure to significant liability, reputational harm, and other serious negative consequences if we sustain cyber attacks or other data security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us or our customers or other third-parties.

        Our operations are dependent upon our ability to protect our computer equipment and the electronic data stored in our databases from damage by, among other things, earthquake, fire, natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, employee misconduct, physical or electronic break-ins, or similar events or disruptions. We manage and store various proprietary information and sensitive or confidential data relating to our operations. In addition, our outsourcing services and cloud computing businesses routinely process, store, and transmit large amounts of data for our customers and vendors, including sensitive and personally identifiable information. As our operations become more automated and increasingly interdependent, our exposure to the risks posed by these types of events will increase. We may also be subject to breaches of the information technology systems we use for these purposes, information technology system failures and network disruptions. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third-parties, create system disruptions, or cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses, worms, and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. In addition, sophisticated hardware and operating system software and applications that we produce or procure from third-parties may contain defects in design or manufacture, including "bugs" and other problems that could unexpectedly interfere with the operation of the system.

        The costs to us to eliminate or address the foregoing security problems and security vulnerabilities before or after a cyber incident could be significant. System redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient for all eventualities. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service, and loss of existing or potential customers that may impede our sales, manufacturing, distribution, or other critical functions. We could lose existing or potential customers for outsourcing services or other information technology solutions in connection with any actual or perceived security vulnerabilities in our products. In addition, breaches of our security measures and the unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers or other third-parties, could expose us, our vendors and customers, or other third-parties affected to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our brand and reputation, or otherwise harm our business. In addition, we rely in certain limited capacities on third-party data management providers whose possible security problems and security vulnerabilities may have similar effects on us.

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        We are subject to laws, rules, and regulations in the U.S. and other countries relating to the collection, use, and security of user data. Our ability to execute transactions and to possess and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that may require us to notify vendors, customers or employees of a data security breach. We have incurred, and will continue to incur, significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards, or contractual obligations.

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

        We have significant operations in foreign countries, including manufacturing facilities, sales personnel and customer support operations. We have manufacturing facilities in China, Malaysia, Northern Ireland, Singapore and Thailand, in addition to those in the United States. A substantial portion of our client compute disk drive assembly occurs in our facility in China.

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

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

        We have manufacturing facilities in parts of the world that periodically experience political unrest. This could disrupt our ability to manufacture important components as well as cause interruptions and/or delays in our ability to ship components to other locations for continued manufacture and assembly. Any such delays or interruptions could result in delays in our ability to fill orders and have an adverse effect on our results of operations and financial condition. U.S. and international responses to the ongoing hostilities in various regions and the risk of terrorist attacks or hostilities elsewhere in the world could exacerbate these risks.

        Macroeconomic developments like the debt crisis in certain countries in the European Union and slowing economies in parts of Asia and South America could negatively affect our business, operating results or financial condition which, in turn, could adversely affect our stock price. A general weakening of, and related declining corporate confidence in, the global economy or the curtailment in government or corporate spending could cause current or potential customers to reduce their information technology (IT) budgets or be unable to fund hardware systems, which could cause customers to delay, decrease or cancel purchases of our products or cause customers not to pay us or to delay paying us for previously purchased products and services.

        In addition, political unrest in regions like the Middle East, terrorist attacks around the globe and the potential for other hostilities in various parts of the world, potential public health crises and natural disasters continue to contribute to a climate of economic and political uncertainty that could adversely affect our results of operations and financial condition, including our revenue growth and profitability. These factors generally have the strongest effect on our sales.

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

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

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

        Our future performance depends to a significant degree upon the continued service of key members of management as well as marketing, sales and product development personnel. The loss of one or more of our key personnel may have a material adverse effect on our business, results of operations and financial condition. We believe our future success will also depend in large part upon our ability to attract, retain and further motivate highly skilled management, marketing, sales and product development personnel. We have experienced intense competition for personnel, and we cannot assure you that we will be able to retain our key employees or that we will be successful in attracting, assimilating and retaining personnel in the future.

Securities Litigation—Significant fluctuations in the market price of our ordinary shares could result in securities class action claims against us.

        Significant price and value fluctuations have occurred with respect to the publicly traded securities of disk drive companies and technology companies generally. The price of our ordinary shares is likely to be volatile in the future. In the past, following periods of decline in the market price of a company's securities, class action lawsuits have often been pursued against that company. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management's attention and resources, which could materially adversely affect our results of operations, financial condition and liquidity.

Global Credit and Financial Market Conditions—Deterioration in global credit and financial market conditions could negatively impact the value of our current portfolio of cash equivalents or short-term investments and our ability to meet our financing objectives.

        Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. Our short-term investments consist primarily of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. Our investment policy has as its principal objectives the preservation of principal and maintenance of liquidity. We mitigate default risk by investing in high-quality investment grade securities, limiting the time to maturity and by monitoring the counter-parties and underlying obligors closely.

        While as of the date of this filing, we are not aware of any other material downgrades, losses, or other significant deterioration in the fair value of our cash equivalents or short-term investments , no assurance can be given that further deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or short-term investments or our ability to meet our financing objectives.

Environmental Regulations—Failure to comply with applicable environmental laws and regulations could have a material adverse effect on our business, results of operations and financial condition.

        The sale and manufacturing of products in certain states and countries may subject us and our suppliers to state, federal and international laws and regulations governing protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites, restrictions on the presence of certain substances in electronic products and the responsibility for environmentally safe disposal or recycling. We endeavor to ensure that we and our suppliers comply with all applicable environmental laws and regulations, however, compliance may increase our operating costs and otherwise impact future financial results. If additional or more stringent requirements are imposed on us in the future, we could incur additional operating costs and capital expenditures. If we fail to comply with applicable environmental laws, regulations, initiatives, or standards of conduct, our customers may refuse to purchase our products and we could be subject to fines, penalties and possible prohibition of sales of our products into one or

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more states or countries, liability to our customers and damage to our reputation, which could result in a material adverse effect on the financial condition or results of operations.

New conflict minerals regulations may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

        In August 2012, the SEC adopted new rules establishing additional disclosure and reporting requirements regarding the use of specified minerals, or conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. These new rules will require us to determine, disclose and report whether or not such conflict minerals originate from the Democratic Republic of the Congo or an adjoining country, the first such report being due on May 31, 2014. These new rules could affect our ability to source certain materials used in our products at competitive prices and could impact the availability of certain minerals used in the manufacture of our products, including gold, tantalum, tin and tungsten. As there may be only a limited number of suppliers of "conflict free" minerals, we cannot be sure that we will be able to obtain necessary conflict free minerals in sufficient quantities or at competitive prices. Our customers, including our OEM customers, may require that our products be free of conflict minerals, and our revenues and margins may be harmed if we are unable to procure conflict free minerals at a reasonable price, or at all, or are unable to pass through any increased costs associated with meeting these demands. Additionally, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement. We may also face challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. We expect that there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs related to possible changes to products, processes, or sources of supply as a consequence of such verification and disclosure requirements.

Seasonality—Because we experience seasonality in the sales of our products, our results of operations will generally be adversely impacted during the second half of our fiscal year.

        Sales of computer systems, storage subsystems and consumer electronics tend to be seasonal, and therefore we expect to continue to experience seasonality in our business as we respond to variations in our customers' demand for disk drives. In particular, we anticipate that sales of our products will continue to be lower during the second half of our fiscal year. In the client compute and client non-compute market applications of our business, this seasonality is partially attributable to the historical trend in our results derived from our customers' increased sales of desktop computers, notebook computers, and consumer electronics during the back-to-school and winter holiday season. In the enterprise market our sales are seasonal because of the capital budgeting and purchasing cycles of our end users. Since our working capital needs peak during periods in which we are increasing production in anticipation of orders that have not yet been received, our results of operations will fluctuate seasonally even if the forecasted demand for our products proves accurate. Furthermore, it is difficult for us to evaluate the degree to which this seasonality may affect our business in future periods because of the rate and unpredictability of product transitions and new product introductions, particularly in the client non-compute market, as well as macroeconomic conditions.

Volatile Public Markets—The price of our ordinary shares may be volatile and could decline significantly.

        The stock market, in general, and the market for technology stocks in particular, has recently experienced volatility that has often been unrelated to the operating performance of companies. If these market or industry-based fluctuations continue, the trading price of our ordinary shares could decline significantly independent of our actual operating performance, and you could lose all or a substantial part

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of your investment. The market price of our ordinary shares could fluctuate significantly in response to several factors, including among others:

Political events, war, terrorism, natural disasters, public health issues and other circumstances could materially adversely affect our results of operations and financial condition.

        War, terrorism, geopolitical uncertainties, natural disasters, public health issues, and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on our business, our suppliers, logistics providers, manufacturing vendors and customers. Our business operations are subject to interruption by natural disasters such as floods and earthquakes, fire, power shortages, terrorist attacks, other hostile acts, labor disputes, public health issues, and other events beyond our control. Such events could decrease demand for our products, make it difficult or impossible for us to make and deliver products to our customers, or to receive components from our suppliers, and create delays and inefficiencies in our supply chain. In the event of a natural disaster, losses and significant recovery time could be required to resume operations and our financial condition and operating results could be materially adversely affected. Should major public health issues, including pandemics, arise, we could be negatively affected by stringent employee travel restrictions, additional limitations in freight services, governmental actions limiting the movement of products between regions, delays in production ramps of new products, and disruptions in our operations and some of our key customers.

If we do not realize the expected benefits of our Strategic Alignment with Samsung, our business and financial condition may be materially impaired.

        We may not achieve the desired benefits from our strategic alignment with Samsung. Even if we are able to successfully integrate the business that we acquired from Samsung into our business, we may not be able to realize the cost savings, synergies and growth that we anticipate from this transaction in the timeframe we currently expect, and the costs of achieving these benefits may be higher than we currently expect, because of a number of risks, including but not limited to:

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        In addition, the Chinese Ministry of Commerce conditioned its approval of the Samsung acquisition on our compliance with several on-going requirements, including: adopting measures to keep the Samsung HDD brand as a separate competitor to the Seagate HDD brand, expanding the Samsung HDD production capacity within six months of the decision, and investing at least $800 million per year for three years in R&D in our combined Samsung and Seagate HDD businesses. Compliance with these obligations may involve significant costs or require changes in business practices that result in reduced revenue. Noncompliance could result in extending the time under which we would be compelled to operate under these conditions.

        As a result of these risks, the transaction may not contribute to our earnings as we expected, we may not achieve expected cost synergies when expected, or at all, and we may not achieve the other anticipated strategic and financial benefits of this transaction.

Our ability to use our net operating loss and tax credit carryforwards might be limited.

        At June 28, 2013, the use of approximately $358 million and $90 million of our U.S. net operating loss and tax credit carryforwards, respectively, is subject to an aggregate annual limitation of $45 million pursuant to U.S. tax law. To the extent these net operating loss and tax credit carryforwards are available, we intend to use them to reduce the corporate income tax liability associated with our operations in the U.S. Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss or tax credit carryforwards that might be used to offset taxable income when a corporation has undergone significant changes in ownership. As a result, future changes in ownership, such as changes in ownership resulting from future repurchases of our ordinary shares, could put limitations on the availability of our net operating loss or tax credit carryforwards. If certain ownership changes occur in the foreseeable future, there may be an additional annual limitation on our ability to use our total U.S. federal and state net operating loss and credit carryforwards of $2.8 billion, $1.8 billion, and $415 million, respectively. If these ownership changes were to occur, we estimate a one-time charge for additional U.S. income tax expense of approximately $400 to $500 million may be recorded in the period such change occurs. This additional income tax expense results from a decrease in our net U.S. deferred tax assets recorded through a combination of the write off of deferred tax assets and associated changes to our valuation allowance. We also estimate that the ensuing additional annual limitation on our ability to use tax attribute carryovers may result in increased U.S. income tax expense associated with such change of approximately $70 to $85 million each year.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

        Our company headquarters are located in Ireland, while our U.S. executive offices are located in Cupertino, California. Our principal manufacturing facilities are located in China, Malaysia, Northern Ireland, Singapore, Thailand and Minnesota. Our principal product development facilities are located in California, Colorado, Minnesota, Singapore and South Korea. Our leased facilities are occupied under leases that expire at various times through 2023.

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        Our material manufacturing, product development and marketing and administrative facilities at June 28, 2013 are as follows:

Location
  Building(s)
Owned or Leased
  Approximate
Square Footage
  Primary Use

United States

             

California

  Owned/Leased     895,000   Product development and marketing and administrative

Colorado

  Owned     528,000   Product development

Minnesota

  Owned/Leased     1,085,000   Manufacture of recording heads and product development

Oklahoma

  Owned/Leased     150,000   Administrative

Europe

             

Northern Ireland

             

Springtown

  Owned     479,000   Manufacture of recording heads

Asia

             

China

             

Suzhou

  Owned(1)     1,103,000   Manufacture of drives

Wuxi

  Leased     716,000   Manufacture of drives and drive subassemblies

Malaysia

             

Johor

  Owned(1)     631,000   Manufacture of substrates

Penang

  Owned(1)     390,000   Manufacture of drive subassemblies

Singapore

             

Woodlands

  Owned(1)     1,404,000   Manufacture of media

Ang Mo Kio

  Leased     258,000   Manufacturing support, product development and administrative

Science Park

  Leased     110,000   Product development

Thailand

             

Korat

  Owned     1,716,000   Manufacture of drives and drive subassemblies

Teparuk

  Owned     362,000   Manufacture of drive subassemblies

Korea

             

Suwon

  Owned     220,000   Product development

(1)
Land leases for these facilities expire at varying dates through 2067.

        As of June 28, 2013, we owned or leased a total of approximately 11.4 million square feet of space worldwide. We occupied approximately 7.0 million square feet for the purpose of manufacturing, 1.9 million square feet for product development, 1.6 million square feet for marketing and administrative purposes and subleased 0.2 million square feet. Included in the 11.4 million square feet of owned or leased space is a total of 0.9 million square feet that is currently unoccupied, primarily as a result of site closures at our facilities in Longmont, Colorado and Ang Mo Kio (AMK), Singapore. We believe that our existing properties are in good operating condition and are suitable and adequate for the operations for which they are used. As of June 28, 2013, all of our material manufacturing facilities are operating at normal utilization levels and none of our manufacturing facilities are experiencing significant underutilization.

ITEM 3.    LEGAL PROCEEDINGS

        See Item 8. Financial Statements and Supplementary Data—Note 14, Legal, Environmental, and Other Contingencies.

ITEM 4.    MINE SAFETY DISCLOSURES

        Not applicable.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

        Our shares trade on the NASDAQ Global Select Market under the symbol "STX." The high and low sales prices of our shares, as reported by the NASDAQ Global Select Market, are set forth below for the periods indicated.

 
  Price Range  
Fiscal Quarter
  High   Low  

Quarter ended September 30, 2011

  $ 17.17   $ 9.96  

Quarter ended December 30, 2011

  $ 18.60   $ 9.05  

Quarter ended March 30, 2012

  $ 28.63   $ 16.21  

Quarter ended June 29, 2012

  $ 32.55   $ 21.62  

Quarter ended September 28, 2012

  $ 35.71   $ 23.86  

Quarter ended December 28, 2012

  $ 31.49   $ 24.90  

Quarter ended March 29, 2013

  $ 37.94   $ 29.80  

Quarter ended June 28, 2013

  $ 45.50   $ 33.22  

        As of August 1, 2013 there were approximately 1,060 holders of record of our ordinary shares. We did not sell any of our equity securities during fiscal year 2013 that were not registered under the Securities Act of 1933, as amended.

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Performance Graph

        The performance graph below shows the cumulative total shareholder return on our ordinary shares for the period from June 27, 2008 to June 28, 2013. This is compared with the cumulative total return of the Dow Jones US Computer Hardware Index and the Standard & Poor's 500 Stock Index over the same period. The graph assumes that on June 27, 2008, $100 was invested in our ordinary shares and $100 was invested in each of the other two indices, with dividends reinvested on the date of payment without payment of any commissions. Dollar amounts in the graph are rounded to the nearest whole dollar. The performance shown in the graph represents past performance and should not be considered an indication of future performance.


COMPARISON OF 60 MONTH
CUMULATIVE TOTAL RETURN*
Among Seagate Technology, The S&P 500 Index
And The Down Jones US Computer Hardware Index

GRAPHIC

 
  6/27/2008   7/3/2009   7/2/2010   7/1/2011   6/29/2012   6/28/2013  

Seagate Technology

    100.00     55.01     70.48     88.51     139.96     264.96  

S&P 500

    100.00     70.12     68.02     89.11     90.61     106.85  

Dow Jones US Computer Hardware

    100.00     80.22     114.01     145.84     191.47     150.04  

*
$100 invested on 6/27/08 in stock and in index, including reinvestment of dividends.

Copyright© 2013 Bloomberg Finance L.P. All rights reserved.

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Dividends

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

        The following were dividends paid in the last two fiscal years:

Record Date   Paid Date   Dividend
per Share
 
August 5, 2011   August 26, 2011   $ 0.18  
November 3, 2011   November 18, 2011   $ 0.18  
February 15, 2012   March 1, 2012   $ 0.25  
May 2, 2012   May 17, 2012   $ 0.25  
August 5, 2012   August 26, 2012   $ 0.32  
November 14, 2012   November 29, 2012   $ 0.32  
December 14, 2012   December 28, 2012   $ 0.38  
May 15, 2013   May 29, 2013   $ 0.38  

        From the closing of our initial public offering in December 2002 through 2013, we have paid dividends, pursuant to our dividend policy then in effect, totaling approximately $1.9 billion in the aggregate.

Repurchases of Our Equity Securities

        On January 25, 2012, our Board of Directors authorized the repurchase of up to an additional $1 billion of our outstanding ordinary shares.

        On April 26, 2012, the Board of Directors authorized the Company to repurchase an additional $2.5 billion of its outstanding ordinary shares.

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

        The following table sets forth information with respect to all repurchases of our shares made during fiscal quarter ended June 28, 2013:

Period   Total
Number of
Shares
Purchased
  Average Price
Paid per
Share
  Total Number of
Shares
Purchased
as Part of
Publicly
Announced Plans
or Programs
  Approximate
Dollar Value of
Shares
Purchased Under
the Plans or
Programs
  Approximate
Dollar Value of
Shares that May
Yet Be
Purchased Under
the Plans or
Programs
 
(In millions, except average price paid per share)
   
   
   
   
   
 

1st Quarter through 3rd Quarter of Fiscal Year 2013

    53.5   $ 30.13     53.5   $ 1,612   $ 945  

March 30, 2013 through April 26, 2013

                    945  

April 27, 2013 through May 24, 2013

                    945  

May 25, 2013 through June 28, 2013

    1.0     42.00     1.0     42     903  
                       

Through 4th Quarter of Fiscal Year 2013

    54.5   $ 30.35     54.5   $ 1,654   $ 903  
                       

        On July 24, 2013, the Board of Directors authorized the Company to repurchase an additional $2.5 billion of its outstanding ordinary shares.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following selected consolidated financial data set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K, which are incorporated herein by reference, to fully understand factors that may affect the comparability of the information presented below.

        The Consolidated Statements of Operations data for the fiscal years ended June 28, 2013, June 29, 2012 and July 1, 2011, and the Consolidated Balance Sheet data as of June 28, 2013 and June 29, 2012, are derived from our audited Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K. The Consolidated Statements of Operations data for the fiscal years ended July 2, 2010 and July 3, 2009, and the Consolidated Balance Sheet data at July 1, 2011, July 2, 2010 and July 3, 2009, are derived from our audited Consolidated Financial Statements that are not included in this Annual Report on Form 10-K.

 
  Fiscal Years Ended  
(Dollars in millions, except per share data)
  June 28,
2013
  June 29,
2012
  July 1,
2011
  July 2,
2010
  July 3,
2009(1)
 

Revenue

  $ 14,351   $ 14,939   $ 10,971   $ 11,395   $ 9,805  

Gross margin

    3,940     4,684     2,146     3,204     1,410  

Income (loss) from operations

    2,091     3,108     806     1,740     (2,665 )

Net income (loss)

    1,838     2,862     511     1,609     (3,125 )

Total assets

    9,243     10,106     9,225     8,247     7,087  

Total debt

    2,777     2,863     3,512     2,502     2,697  

Equity

  $ 3,506   $ 3,497   $ 2,463   $ 2,724   $ 1,554  

Net income (loss) per share attributable to Seagate Technology plc ordinary shareholders:

                               

Basic

  $ 4.97   $ 6.72   $ 1.13   $ 3.28   $ (6.40 )

Diluted

    4.81     6.49     1.09     3.14     (6.40 )

Number of shares used in per share computations:

                               

Basic

    370     426     451     491     488  

Diluted

    382     441     467     514     488  

Cash dividends declared per share

 
$

1.40
 
$

0.86
 
$

0.18
 
$

 
$

0.27
 

(1)
Includes the effect of a $2.3 billion impairment of goodwill and other long-lived assets.

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Supplementary Financial Data (Unaudited)

        The Company operated and reported financial results based on 13-week quarters in fiscal years 2013 and 2012, which ended on the Friday closest to September 30, December 31, March 31, and June 30.

 
  Fiscal Year 2013 Quarters Ended  
(In millions, except per share data)
  June 28,
2013
  March 29,
2013
  December 28,
2012
  September 28,
2012
 

Revenue

  $ 3,425   $ 3,526   $ 3,668   $ 3,732  

Gross margin

    939     948     992     1,061  

Income from operations

    448     465     555     624  

Net income attributable to Seagate Technology plc

    348     416     492     582  

Net income per share attributable to Seagate Technology plc ordinary shareholders:

                         

Basic

  $ 0.97   $ 1.16   $ 1.33   $ 1.48  

Diluted

    0.94     1.13     1.30     1.42  

 

 
  Fiscal Year 2012 Quarters Ended  
(In millions, except per share data)
  June 29,
2012
  March 30,
2012
  December 30,
2011
  September 30,
2011
 

Revenue

  $ 4,482   $ 4,450   $ 3,195   $ 2,811  

Gross margin

    1,484     1,641     1,010     549  

Income from operations

    1,057     1,210     605     236  

Net income

    1,013     1,146     563     140  

Net income per share:

                         

Basic

  $ 2.46   $ 2.57   $ 1.32   $ 0.33  

Diluted

    2.37     2.48     1.28     0.32  

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

        The following is a discussion of the Company's financial condition, changes in financial condition and results of operations for the fiscal years ended June 28, 2013, June 29, 2012, and July 1, 2011.

        You should read this discussion in conjunction with "Item 6. Selected Financial Data" and "Item 8. Financial Statements and Supplementary Data" included elsewhere in this Annual Report on Form 10-K. Except as noted, references to any fiscal year mean the twelve-month period ending on the Friday closest to June 30 of that year.

        Some of the statements and assumptions included in this Annual Report on Form 10-K are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended, including, in particular, statements about our plans, strategies and prospects and estimates of industry growth for the fiscal year ending June 27, 2014 and beyond. These statements identify prospective information and include words such as "expects," "plans," "anticipates," "believes," "estimates," "predicts," "projects," and similar expressions. These forward-looking statements are based on information available to us as of the date of this Annual Report on Form 10-K and are based on management's current views and assumptions. These forward-looking statements are conditioned upon and also involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or events to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties and other factors may be beyond our control and may pose a risk to our operating and financial condition. Such risks and uncertainties include, but are not limited to: uncertainty in global economic conditions, as consumers and businesses may defer purchases in response to tighter credit and financial news; the impact of variable demand and the adverse pricing environment for disk drives, particularly in view of current business and economic conditions; dependence on our ability to successfully qualify, manufacture and sell our disk drive products in increasing volumes on a cost-effective basis and with acceptable quality, particularly the new disk drive products with lower cost structures; the impact of competitive product announcements; possible excess industry supply with respect to particular disk drive products and our ability to achieve projected cost savings in connection with restructuring plans. Information concerning risks, uncertainties and other factors that could cause results to differ materially from those projected in the forward-looking statements is also set forth in "Item 1A.Risk Factors" of this Annual Report on Form 10-K, which we encourage you to carefully read. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and we undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made. The following is a discussion of the financial condition and results of operations for the fiscal years ended June 28, 2013, June 29, 2012, and July 1, 2011.

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

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Our Company

        We are a leading provider of electronic data storage products. Our principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. Hard disk drives are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drives continue to be the primary medium of mass data storage due to their performance attributes, high quality and cost effectiveness.

        We produce a broad range of electronic data storage products including HDDs, solid state hybrid drives (SSHD) and solid state drives (SSD), which address enterprise applications, where our products are designed for enterprise servers, mainframes and workstations; client compute applications, where our products are designed for desktop and notebook computers; and client non-compute applications, where our products are designed for a wide variety of end user devices such as digital video recorders (DVRs), gaming consoles, personal data backup systems, portable external storage systems and digital media systems. In addition to manufacturing and selling data storage products, we provide data storage services for small to medium-sized businesses, including online backup, data protection and recovery solutions.

Business Overview

        Our industry is characterized by several trends and factors that have a material impact on our strategic planning, financial condition and results of operations.

        From time to time the industry has experienced periods of imbalance between supply and demand. To the extent that the disk drive industry builds capacity based on expectations of demand that do not materialize, price erosion may become more pronounced. Conversely, during periods where demand exceeds supply, price erosion is generally muted.

        In early October 2011, floodwaters north of Bangkok, Thailand inundated many manufacturing industrial parks that contained a number of the factories supporting the HDD industry's supply chain. The HDD industry had concentrated a large portion of its supply chain participants within these industrial parks in an effort to reduce cost and improve logistics. As a result, the inundation of floodwaters into these industrial parks had caused the closure or suspension of production by a number of participants within the HDD supply chain.

        During the supply chain disruption in fiscal year 2012, we believe demand exceeded supply due to the impact from the flooding in Thailand, resulting in an increase in the average selling price ("ASP"). The industry's ability to manufacture and ship drives had substantially recovered as of the end of fiscal year 2012. During fiscal year 2013, price erosion has been relatively benign.

        We believe that continued growth in digital content requires increasingly higher storage capacity in order to store, aggregate, host, distribute, manage, backup and use such content. We also believe that as architectures evolve to serve the growing commercial and consumer user base throughout the world, the manner which hard drives are delivered to market and utilized by our customers will evolve as well.

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        We believe that in the foreseeable future the traditional enterprise and client compute markets that require high capacity storage solutions, as well as the data intensive client non-compute markets, will continue to be best served by hard disk drives due to the industry's ability to deliver cost effective, reliable and energy efficient mass storage devices. Furthermore, the increased use of client non-compute devices that consume media rich content streamed from the cloud increases the demand for high capacity disk drives in nearline applications.

        Price Erosion.    Historically, our industry has been characterized by price declines for disk drive products with comparable capacity, performance and feature sets ("like-for-like products").

        Disk drive manufacturers typically attempt to offset price erosion with an improved mix of disk drive products characterized by higher capacity, better performance and additional feature sets and/or product cost reductions.

Seasonality

        The disk drive industry traditionally experiences seasonal variability in demand with higher levels of demand in the second half of the calendar year. This seasonality is driven by consumer spending in the back-to-school season from late summer to fall and the traditional holiday shopping season from fall to winter. In addition, corporate demand is typically higher during the second half of the calendar year.

Fiscal Year 2013 Summary

        Revenues for fiscal year 2013 were $14.4 billion while gross margin as a percentage of revenue was 27%. We repurchased 54 million of our ordinary shares during the year for approximately $1.7 billion, paid dividends of $0.5 billion, paid $1.2 billion for the early redemption and repurchase of debt with a principal value of $1.1 billion and issued $1.0 billion of 4.75% Senior Notes due 2023.

Results of Operations

        We list in the table below summarized information from our consolidated statements of operations by dollars and as a percentage of revenue:

 
  Fiscal Years Ended  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

Revenue

  $ 14,351   $ 14,939   $ 10,971  

Cost of revenue

    10,411     10,255     8,825  
               

Gross margin

    3,940     4,684     2,146  

Product development

    1,133     1,006     875  

Marketing and administrative

    635     528     445  

Amortization of intangibles

    79     38     2  

Restructuring and other, net

    2     4     18  
               

Income from operations

    2,091     3,108     806  

Other expense, net

    (260 )   (226 )   (227 )
               

Income before income taxes

    1,831     2,882     579  

(Benefit from) provision for income taxes

    (7 )   20     68  
               

Net income

    1,838     2,862     511  

Less: Net income attributable to noncontrolling interest

             
               

Net income attributable to Seagate Technology plc

  $ 1,838   $ 2,862   $ 511  
               

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  Fiscal Years Ended  
(as a percentage of Revenue)
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

Revenue

    100 %   100 %   100 %

Cost of revenue

    73     69     80  
               

Gross margin

    27     31     20  

Product development

    8     7     8  

Marketing and administrative

    4     4     4  

Amortization of intangibles

    1          

Restructuring and other, net

             
               

Income from operations

    14     21     7  

Other expense, net

    (2 )   (2 )   (2 )
               

Income before income taxes

    12     19     5  

Provision for (benefit from) income taxes

            1  
               

Net income

    12     19     5  

Less: Net income attributable to noncontrolling interest

             
               

Net income attributable to Seagate Technology plc

    12 %   19 %   5 %
               

        The following table summarizes information regarding volume shipments, average selling prices (ASPs) and revenues by channel and geography:

 
  Fiscal Years Ended  
(In millions, except percentages and ASPs)
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

Net Revenue

  $ 14,351   $ 14,939   $ 10,971  

Unit Shipments:

                   

Enterprise

    30     29     29  

Client Compute

    151     156     132  

Client Non-Compute

    45     39     38  
               

Total Units Shipped

    226     224     199  

ASP (per unit)

  $ 63   $ 66   $ 54  

Exabytes Shipped

    185     150     110  

Revenues by Channel (%)

                   

OEM

    68 %   72 %   69 %

Distributors

    21 %   21 %   22 %

Retail

    11 %   7 %   9 %

Revenues by Geography (%)

                   

Americas

    27 %   26 %   29 %

EMEA

    19 %   19 %   20 %

Asia Pacific

    54 %   55 %   51 %

Fiscal Year 2013 Compared to Fiscal Year 2012

 
  Fiscal Years Ended  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  Change   %
Change
 

Revenue

  $ 14,351   $ 14,939   $ (588 )   (4 )%

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        Revenue in fiscal year 2013 decreased approximately 4%, or $0.6 billion, from fiscal year 2012 due to a decrease in the average selling price per unit. The decrease in the average selling price to $63 per unit during fiscal year 2013, as compared to $66 per unit in the prior year, was primarily due to supply constraints beginning in the second quarter of fiscal year 2012 as a result of the severe flooding in Thailand, partially offset by a favorable product mix and slightly higher volumes in fiscal year 2013, which included a full period of Samsung labeled HDD products.

 
  Fiscal Years Ended  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  Change   %
Change
 

Cost of revenue

  $ 10,411   $ 10,255   $ 156     2 %

Gross margin

  $ 3,940   $ 4,684   $ (744 )   (16 )%

Gross margin percentage

    27 %   31 %            

        For fiscal year 2013, gross margin as a percentage of revenue decreased to 27% from 31% in the prior fiscal year, as a result of higher ASPs during fiscal year 2012. Our ASPs during fiscal year 2012 were increased due to the limited industry supply of hard drives as a result of the severe flooding in Thailand.

 
  Fiscal Years Ended  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  Change   %
Change
 

Product development

  $ 1,133   $ 1,006   $ 127     13 %

Marketing and administrative

    635     528     107     20 %

Amortization of intangibles

    79     38     41     108 %

Restructuring and other, net

    2     4     (2 )   (50 )%
                     

Operating expenses

  $ 1,849   $ 1,576   $ 273        
                     

        Product Development Expense.    Product development expenses for fiscal year 2013 increased from fiscal year 2012, primarily due to increased investments in HDD and alternative storage technologies of approximately $84 million, and headcount related costs of approximately $41 million, net of a decrease in variable performance based compensation of approximately $7 million.

        Marketing and Administrative Expense.    Marketing and administrative expenses for fiscal year 2013 increased from fiscal year 2012 primarily due to further investments in certain strategic initiatives as well as enhancement of our core business operations. This, along with our annual focal increases, resulted in additional headcount related costs of $64 million, net of a reduction in variable performance based compensation of $7 million. In addition, the consolidation of LaCie in fiscal year 2013 contributed approximately $32 million to Marketing and administrative expense.

        Amortization of Intangibles.    Amortization of intangibles for fiscal year 2013 increased as a result of the acquisition of Samsung's HDD business in December of 2011, and LaCie in August of 2012.

        Restructuring and Other, net.    Restructuring and other, net for fiscal years 2013 and 2012, was not material and primarily related to previously announced restructuring plans.

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  Fiscal Years Ended  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  Change   %
Change
 

Other expense, net

  $ (260 ) $ (226 ) $ (34 )   15 %

        Other expense, net for fiscal year 2013 compared to fiscal year 2012 increased due to a loss of $141 million on the early redemption and repurchase of debt. These losses were partially offset by gains recorded for sales of our available for sale securities and strategic investments of $61 million, insurance proceeds of $25 million for equipment damaged during the severe flooding in Thailand in October of 2011, and a decrease in interest expense of $27 million due to a reduction in our average interest rate and total debt levels.

 
  Fiscal Years Ended  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  Change   %
Change
 

Provision for (benefit from) income taxes

  $ (7 ) $ 20   $ (27 )   (135 )%

        We recorded an income tax benefit of $7 million for fiscal year 2013 compared to an income tax provision of $20 million for fiscal year 2012. Our fiscal year 2013 benefit from income taxes included $52 million of income tax benefit from the reversal of a portion of the U.S. valuation allowance recorded in prior periods. Our fiscal year 2012 provision for income taxes included $35 million of income tax benefit from the reversal of a portion of the U.S. valuation allowance recorded in prior periods.

        Our Irish tax resident parent holding company owns various U.S. and non-U.S. subsidiaries that operate in multiple non-Irish tax jurisdictions. Our worldwide operating income is either subject to varying rates of tax or is exempt from tax due to tax holidays or tax incentive programs we operate under in Malaysia, Singapore and Thailand. These tax holidays or incentives are scheduled to expire in whole or in part at various dates through 2020.

        Our income tax provision recorded for fiscal year 2013 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related to non-U.S. earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a decrease in valuation allowance for certain U.S. deferred tax assets. The acquisition of a majority interest in the outstanding shares of LaCie did not have a material impact on our effective tax rate in fiscal year 2013. Our income tax provision recorded for fiscal year 2012 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related to non-U.S. earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland, and (ii) a decrease in valuation allowance for certain U.S. deferred tax assets. The acquisition of Samsung's HDD business did not have a significant impact on our effective tax rate in fiscal year 2012.

        The American Taxpayer Relief Act of 2012 (ATRA 2012) was enacted on January 2, 2013. ATRA 2012 retroactively reinstated and extended the federal Research and Development Tax Credit (R&D Credit) from January 1, 2012 to December 31, 2013 as well as bonus depreciation on qualified property. Extension of the R&D Credit and bonus depreciation has no immediate impact on our income tax provision due to existing valuation allowances on our U.S. deferred tax assets. None of the other ATRA 2012 changes are expected to have a material impact on our income tax provision.

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        Based on our non-U.S. ownership structure and subject to (i) potential future increases in our valuation allowance for deferred tax assets; and (ii) a future change in our intention to indefinitely reinvest earnings from our subsidiaries outside of Ireland, we anticipate that our effective tax rate in future periods will generally be less than the Irish statutory rate.

        At June 28, 2013, our deferred tax asset valuation allowance was approximately $989 million.

        At June 28, 2013, we had net deferred tax assets of $554 million. The realization of these deferred tax assets is primarily dependent on our ability to generate sufficient U.S. and certain non-U.S. taxable income in future periods. Although realization is not assured, we believe that it is more likely than not that these deferred tax assets will be realized. The amount of deferred tax assets considered realizable, however, may increase or decrease in subsequent periods when we re-evaluate the underlying basis for our estimates of future U.S. and certain non-U.S. taxable income.

        As of June 28, 2013, the use of approximately $358 million and $90 million of our total U.S. net operating loss and tax credit carry forwards, respectively, is subject to an aggregate annual limitation of $45 million pursuant to U.S. tax law. If certain ownership changes occur in the foreseeable future, there may be an additional annual limitation on our ability to use our total U.S. federal and state net operating loss and credit carryforwards of $2.8 billion, $1.8 billion and $415 million, respectively. It is reasonably possible that such a change could occur. If these ownership changes were to occur, we estimate a one-time charge for additional U.S. income tax expense of approximately $ 400 to $500 million may be recorded in the period such change occurs. This additional income tax expense results from a decrease in our net U.S. deferred tax assets recorded through a combination of the write off of deferred tax assets and associated changes to our valuation allowance. We also estimate that the ensuing additional annual limitation on our ability to use our tax attribute carryovers may result in increased U.S. income tax expense associated with such change of approximately $70 to $85 million each year.

        As of June 28, 2013 and June 29, 2012, we had approximately $157 million and $135 million, respectively, of unrecognized tax benefits excluding interest and penalties. The unrecognized tax benefits that, if recognized, would impact the effective tax rate is $157 million and $135 million as of June 28, 2013 and June 29, 2012, respectively, subject to certain future valuation allowance reversals.

        It is our policy to include interest and penalties related to unrecognized tax benefits in the provision for taxes on the Consolidated Statements of Operations. During fiscal year 2013, we recognized a net tax expense for interest and penalties of $2 million as compared to a net tax expense for interest and penalties of $2 million and less than $1 million during fiscal year 2012 and fiscal year 2011, respectively. As of June 28, 2013, we had $19 million of accrued interest and penalties related to unrecognized tax benefits compared to $17 million in fiscal year 2012.

        During the fiscal year ended June 28, 2013, our unrecognized tax benefits excluding interest and penalties increased by approximately $22 million primarily due to (i) increases in current year unrecognized tax benefits of $16 million, (ii) net increases in prior year unrecognized tax benefits of $10 million, (iii) reductions associated with the expiration of certain statutes of limitation of $5 million, (iv) increases from other activity, including non-U.S. exchange gains, of $1 million.

        During the 12 months beginning June 29, 2013, we expect to reduce our unrecognized tax benefits by approximately $3 million as a result of the expiration of certain statutes of limitation. We do not believe it is reasonably possible that other unrecognized tax benefits will materially change in the next 12 months.

        We are subject to taxation in many jurisdictions globally and are required to file U.S. federal, U.S. state, and non-U.S income tax returns. In February, 2013, we reached a settlement with the IRS on all issues related to fiscal years ending in 2005 through 2007. Settlement of the issues in this period has no material impact on our financial statements. We are no longer subject to tax examination of U.S. federal income tax returns for years prior to fiscal year 2008. With respect to U.S. state and non-U.S. income tax returns, we are generally no longer subject to tax examination for years prior to fiscal year 2004.

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Fiscal Year 2012 Compared to Fiscal Year 2011

 
  Fiscal Years Ended  
(Dollars in millions)
  June 29,
2012
  July 1,
2011
  Change   %
Change
 

Revenue

  $ 14,939   $ 10,971   $ 3,968     36 %

        Revenue in fiscal year 2012 increased approximately 36%, or $4.0 billion, from fiscal year 2011 due primarily to an increase in average selling price per unit and in total units shipped. Units shipped in fiscal year 2012 increased 13%, or 25 million units, from fiscal year 2011. The increase in the average selling price to $66 per unit during fiscal year 2012, as compared to $54 per unit in the prior year, was primarily due to the limited industry supply of hard drives resulting from the severe flooding in Thailand.

 
  Fiscal Years Ended  
(Dollars in millions)
  June 29,
2012
  July 1,
2011
  Change   %
Change
 

Cost of revenue

  $ 10,255   $ 8,825   $ 1,430     16 %

Gross margin

  $ 4,684   $ 2,146   $ 2,538     118 %

Gross margin percentage

    31 %   20 %            

        For fiscal year 2012, gross margin as a percentage of revenue increased to 31% from 20% in the prior fiscal year, primarily due to the increased selling price per unit throughout most of fiscal year 2012.

 
  Fiscal Years Ended  
(Dollars in millions)
  June 29,
2012
  July 1,
2011
  Change   %
Change
 

Product development

  $ 1,006   $ 875   $ 131     15 %

Marketing and administrative

    528     445     83     19 %

Amortization of intangibles

    38     2     36     1,800 %

Restructuring and other, net

    4     18     (14 )   (78 )%
                     

Operating expenses

  $ 1,576   $ 1,340   $ 236        
                     

        Product Development Expense.    Product development expenses for fiscal year 2012 increased from fiscal year 2011, primarily reflecting an increase in variable performance-based compensation and the integration of the HDD business acquired from Samsung.

        Marketing and Administrative Expense.    The increase in Marketing and administrative expenses for fiscal year 2012 compared to fiscal year 2011 was primarily due to an increase in variable performance-based compensation and integration of the HDD business acquired from Samsung.

        Amortization of Intangibles.    Amortization of intangibles for fiscal year 2012 increased as a result of the acquisition of Samsung's HDD business in December 2011.

        Restructuring and Other, net.    Restructuring and other, net for fiscal years 2012 and 2011, were not material and primarily related to previously announced restructuring plans.

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  Fiscal Years Ended  
(Dollars in millions)
  June 29,
2012
  July 1,
2011
  Change   %
Change
 

Other expense, net

  $ (226 ) $ (227 ) $ 1     %

        Other expense, net for fiscal year 2012 compared to fiscal year 2011 was relatively flat, and included an increase in interest expense resulting from higher average debt balances, substantially offset by gains on foreign currency remeasurement.

 
  Fiscal Years Ended  
(Dollars in millions)
  June 29,
2012
  July 1,
2011
  Change   %
Change
 

Provision for income taxes

  $ 20   $ 68   $ (48 )   (71 )%

        We recorded an income tax provision of $20 million for fiscal year 2012 compared to an income tax provision of $68 million for fiscal year 2011. Our fiscal year 2012 provision for income taxes included $35 million of income tax benefit from the reversal of a portion of the U.S. valuation allowance recorded in prior periods. Our fiscal year 2011 provision for income taxes included non-U.S. income taxes recorded for increases in income tax reserves for non-U.S. income tax positions taken in prior fiscal years, partially offset by tax benefits recorded for the release of income tax reserves associated with settlements of income tax audits and the expiration of certain statutes of limitation.

        Our income tax provision recorded for fiscal year 2012 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related to non-U.S. earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland, and (ii) a decrease in valuation allowance for certain U.S. deferred tax assets. The acquisition of Samsung's HDD business did not have a significant impact on our effective tax rate in fiscal year 2012. Our income tax provision recorded for the comparative fiscal year ended July 1, 2011 differed the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes primarily due to the net effect of (i) tax benefits related to non-U.S. earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland, (ii) income tax expense related to intercompany transactions, (iii) a decrease in valuation allowance for certain deferred tax assets, and (iv) non-U.S. losses with no tax benefit.

Liquidity and Capital Resources

        The following sections discuss our principal liquidity requirements, as well as our sources and uses of cash and our liquidity and capital resources. Our cash and cash equivalents are maintained in investments with remaining maturities of 90 days or less at the time of purchase. Our short-term investments consist primarily of readily marketable securities with remaining maturities of more than 90 days at the time of purchase. The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We intend to maintain a highly liquid portfolio by investing only in those marketable securities that we believe have active secondary or resale markets. We believe our cash equivalents and short-term investments are liquid and accessible. We operate in some countries that have restrictive regulations over the movement of cash and/or foreign exchange across their borders. However, these restrictions have not impeded our ability to conduct our business, nor do we expect them to in the next 12 months. We are not aware of any downgrades, losses or other significant deterioration in the fair

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value of our cash equivalents or short-term investments and accordingly, we do not believe the fair value of our short-term investments has significantly changed from the values reported as of June 28, 2013.

 
  As of  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  Change  

Cash and cash equivalents

  $ 1,708   $ 1,707   $ 1  

Short-term investments

    480     411     69  

Restricted cash and investments

    101     93     8  
               

Total

  $ 2,289   $ 2,211   $ 78  
               

        Our cash and cash equivalents, short-term investments and restricted cash and investments increased from June 29, 2012 as a result of net cash provided by operating activities and the proceeds from the issuance of $1 billion of our 4.75% notes due 2023. These cash inflows were partially offset by our repurchases of our ordinary shares, capital expenditures, redemption and repurchase of certain of our long-term debt, and dividends paid to our shareholders.

        The following table summarizes results from the statement of cash flows for the periods indicated:

 
  Fiscal Years Ended  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

Net cash flow provided by (used in):

                   

Operating activities

  $ 3,047   $ 3,262   $ 1,264  

Investing activities

    (825 )   (1,114 )   (981 )

Financing activities

    (2,222 )   (3,118 )   131  

Effect of foreign currency exchange rates

    1          
               

Net increase (decrease) in cash and cash equivalents

  $ 1   $ (970 ) $ 414  
               

        Cash provided by operating activities for fiscal year 2013 was approximately $3.0 billion and includes the effects of net income adjusted for non-cash items including depreciation, amortization, stock-based compensation, and:

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        Cash provided by operating activities for fiscal year 2012 was approximately $3.3 billion and includes the effects of net income adjusted for non-cash items including depreciation, amortization, stock-based compensation, and:

        Cash provided by operating activities for fiscal year 2011 was approximately $1.3 billion and includes the effects of net income adjusted for non-cash items including depreciation, amortization, stock-based compensation, impairment of long-lived assets, and:

        In fiscal year 2013, we used $0.8 billion for net cash investing activities, which was primarily due to payments for property, equipment and leasehold improvements.

        In fiscal year 2012, we used $1.1 billion for net cash investing activities, which was primarily due to payments for property, equipment and leasehold improvements of approximately $0.6 billion and net payments for the acquisition of Samsung's HDD business of $0.6 billion.

        In fiscal year 2011, we used $1.0 billion for net cash investing activities, which was primarily attributable to payments for property, equipment and leasehold improvements of approximately $0.8 billion.

        Net cash used in financing activities of $2.2 billion for fiscal year 2013 was attributable to $1.7 billion paid to repurchase 54 million of our ordinary shares, $1.2 billion for the repurchase and redemption of long term debt and $0.5 billion in dividends paid to our shareholders. This use of cash was partially offset by the proceeds from the issuance of $1 billion of our 4.75% notes due 2023 and $0.3 billion in proceeds from the issuance of ordinary shares under employee stock plans.

        Net cash used in financing activities of $3.1 billion for fiscal year 2012 was attributable to $2.4 billion paid to repurchase 101 million of our ordinary shares, $0.7 billion in long term debt repayments and $0.4 billion in dividends paid to our shareholders. This use of cash was partially offset by $0.3 billion in proceeds from the exercise of stock options and employee stock purchases.

        Net cash provided by financing activities of $0.1 billion for fiscal year 2011 was attributable to $1.3 billion in net proceeds from the issuance of long-term debt partially offset by $0.8 billion to repurchase 56.9 million of our ordinary shares and $0.4 billion for the repayment of our long-term debt.

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        Our primary sources of liquidity as of June 28, 2013, consisted of: (1) approximately $2.2 billion in cash and cash equivalents, and short-term investments, (2) cash we expect to generate from operations and (3) a $500 million revolving credit facility. We also had $101 million in restricted cash and investments, of which $79 million was related to our employee deferred compensation liabilities under our non-qualified deferred compensation plan.

        As of June 28, 2013, no borrowings have been drawn under the revolving credit facility, and $2 million had been utilized for letters of credit. The line of credit is available for borrowings, subject to compliance with financial covenants and other customary conditions to borrowing.

        The credit agreement that governs our revolving credit facility, as amended, contains certain covenants that we must satisfy in order to remain in compliance with the credit agreement, as amended. The agreement also includes three financial covenants: (1) minimum cash, cash equivalents and marketable securities; (2) a fixed charge coverage ratio; and (3) a net leverage ratio. As of June 28, 2013, we were in compliance with all of the covenants under our revolving credit facility and debt agreements.

        As of June 28, 2013, cash and cash equivalents held by non-Irish subsidiaries was $1.7 billion. This amount is potentially subject to taxation in Ireland upon repatriation by means of a dividend into our Irish parent. However, it is our intent to indefinitely reinvest earnings of non-Irish subsidiaries outside of Ireland and our current plans do not demonstrate a need to repatriate such earnings by means of a taxable Irish dividend. Should funds be needed in the Irish parent company and should we be unable to fund parent company activities through means other than a taxable Irish dividend, we would be required to accrue and pay Irish taxes on such dividend.

        We believe that our sources of cash will be sufficient to fund our operations and meet our cash requirements for at least the next 12 months.

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

        On July 24, 2013, our Board of Directors approved a cash dividend of $0.38 per share, which will be payable on August 21, 2013 to shareholders of record as of the close of business on August 7, 2013.

        As of June 28, 2013, we were in compliance with all of the covenants under our debt agreements. Based on our current outlook, we expect to be in compliance with the covenants of our debt agreements over the next 12 months.

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        The carrying value of our long-term debt as of June 28, 2013 and June 29, 2012 was $2.8 billion and $2.9 billion, respectively. The table below presents the principal amounts of our outstanding long-term debt:

 
  As of  
(Dollars in millions)
  June 28,
2013
  June 29,
2012
  Change  

10.0% Senior Secured Second-Priority Notes due May 2014

  $   $ 319   $ (319 )

6.8% Senior Notes due October 2016

    335     600     (265 )

7.75% Senior Notes due December 2018

    238     750     (512 )

6.875% Senior Notes due May 2020

    600     600      

7.00% Senior Notes due November 2021

    600     600      

4.75% Senior Notes due June 2023

    1,000         1,000  

Other

    4         4  
               

Total

  $ 2,777   $ 2,869   $ (92 )
               

        During fiscal year 2013, we repurchased approximately 54 million of our ordinary shares. See "Item 5. Market for Registrant's Shares, Related Shareholder Matters and Issuer Purchases of Equity Securities-Repurchases of Our Equity Securities."

        For fiscal year 2014, we expect capital investments to remain within our long-term targeted range of 6-8% of revenue. We require substantial amounts of cash to fund scheduled payments of principal and interest on our indebtedness, future capital expenditures and any increased working capital requirements. We will continue to evaluate and manage the retirement and replacement of existing debt and associated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and retiring debt pursuant to privately negotiated transactions, open market purchases or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions and investments, which may require additional capital.

Contractual Obligations and Commitments

        Our contractual cash obligations and commitments as of June 28, 2013, have been summarized in the table below:

 
   
  Fiscal Year(s)  
(Dollars in millions)
  Total   2014   2015-
2016
  2017-
2018
  Thereafter  

Contractual Cash Obligations:

                               

Long-term debt

  $ 2,777   $ 3   $ 1   $ 335   $ 2,438  

Interest payments on debt

    1,317     173     365     288     491  

Capital expenditures

    284     168     116          

Operating leases(1)

    165     31     35     18     81  

Purchase obligations(2)

    1,470     1,286     184          

Other funding requirements

    30     30              
                       

Subtotal

    6,043     1,691     701     641     3,010  

Commitments:

                               

Letters of credit or bank guarantees

    31     28     3          
                       

Total

  $ 6,074   $ 1,719   $ 704   $ 641   $ 3,010  
                       

(1)
Includes total future minimum rent expense under non-cancelable leases for both occupied and vacated facilities (rent expense is shown net of sublease income).

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(2)
Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms.

        As of June 28, 2013, we had a liability for unrecognized tax benefits and an accrual for the payment of related interest totaling $87 million, none of which is expected to be settled within one year. Outside of one year, we are unable to make a reasonably reliable estimate of when cash settlement with a taxing authority will occur.

Off-Balance Sheet Arrangements

        As of June 28, 2013, we did not have any material off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).

Critical Accounting Policies

        The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and operating results, and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are highly uncertain at the time of estimation. Based on this definition, our most critical policies include: establishment of sales program accruals, establishment of warranty accruals, accounting for income taxes, and the accounting for goodwill and other long-lived assets. Below, we discuss these policies further, as well as the estimates and judgments involved. We also have other accounting policies and accounting estimates relating to uncollectible customer accounts, valuation of inventory, valuation of share-based payments and restructuring. We believe that these other accounting policies and accounting estimates either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period.

        Establishment of Sales Program Accruals.    We establish certain distributor and OEM sales programs aimed at increasing customer demand. For OEM sales, rebates are typically based on an OEM customer's volume of purchases or other agreed upon rebate programs. For the distribution channel, these programs typically involve rebates related to a distributor's level of sales, order size, advertising or point of sale activity and price protection adjustments. We provide for these obligations at the time that revenue is recorded based on estimated requirements. We estimate these contra-revenue rebates and adjustments based on various factors, including price reductions during the period reported, estimated future price erosion, customer orders, distributor sell-through and inventory levels, program participation, customer claim submittals and sales returns. Our estimates reflect contractual arrangements but also our judgment relating to variables such as customer claim rates and attainment of program goals, and inventory and sell-through levels reported by our distribution customers. Currently, our distributors' inventories are at the low end of the historical range.

        While we believe we have sufficient experience and knowledge of the market and customer buying patterns to reasonably estimate such rebates and adjustments, actual market conditions or customer behavior could differ from our expectations. As a result, actual payments under these programs, which may spread over several months after the related sale, may vary from the amount accrued. Accordingly, revenues and margins in the period in which the adjustment occurs may be affected.

        Significant actual variations in any of the factors upon which we base our contra-revenue estimates could have a material effect on our operating results. In fiscal year 2013, sales programs were approximately 9% of gross revenue. For fiscal years 2012 and 2011, total sales programs ranged from 2% to 9% of gross revenues. Adjustments to revenues due to under or over accruals for sales programs related to revenues reported in prior quarterly periods averaged 0.3% of quarterly gross revenue for fiscal years 2011 through 2012, and were approximately 0.3% of gross revenue in fiscal year 2013. Any future shifts in the

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industry supply-demand balance as well as other factors may result in a more competitive pricing environment and may cause sales programs as a percentage of gross revenue to increase from the current or historical levels. If such rebates and incentives trend upwards, revenues and margins will be reduced.

        Establishment of Warranty Accruals.    We estimate probable product warranty costs at the time revenue is recognized. We generally warrant our products for a period of 1 to 5 years. Our warranty provision considers estimated product failure rates and trends (including the timing of product returns during the warranty periods), and estimated repair or replacement costs related to product quality issues, if any. We also exercise judgment in estimating our ability to sell certain repaired disk drives. Should actual experience in any future period differ significantly from our estimates, our future results of operations could be materially affected. Our judgment is subject to a greater degree of subjectivity with respect to newly introduced products because of limited experience with those products upon which to base our warranty estimates.

        The actual results with regard to warranty expenditures could have an adverse or favorable effect on our results of operations if the actual rate of unit failure, the cost to repair a unit, or the actual cost required to satisfy customer claims differs from those estimates we used in determining the warranty accrual. Since we typically outsource our warranty repairs, our repair cost is subject to periodic negotiations with vendors and may vary from our estimates. We also exercise judgment in estimating our ability to sell certain repaired disk drives. To the extent such sales fall below our forecast, warranty cost will be adversely impacted.

        We review our warranty accrual quarterly for products shipped in prior periods and which are still under warranty. Any changes in the estimates underlying the accrual may result in adjustments that impact the current period gross margins and income. In fiscal years 2013, 2012 and 2011 net changes in estimates of prior warranty accruals as a percentage of revenue were immaterial. Our total warranty cost was 1.6%, 1.5% and 1.8% of revenue during fiscal years 2013, 2012 and 2011, respectively, while warranty cost related to new shipments (exclusive of the impact of re-estimates of pre-existing liabilities) were 1.3%, 1.1% and 1.8% respectively, for the same periods. Changes in anticipated failure rates of specific products and significant changes in repair or replacement costs have historically been the major reasons for significant changes in prior estimates. Any future changes in failure rates of certain products, as well as changes in repair costs or the cost of replacement parts, may result in increased or decreased warranty accruals.

        Accounting for Income Taxes.    We account for income taxes pursuant to Accounting Standards Codification (ASC) Topic 740 (ASC 740), Income Taxes. In applying, ASC 740, we make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, recognition of income and deductions and calculation of specific tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as tax liabilities associated with uncertain tax positions. The calculation of tax liabilities involves uncertainties in the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other tax jurisdictions. If estimates of these tax liabilities are greater or less than actual results, an additional tax benefit or provision will result. The deferred tax assets we record each period depend primarily on our ability to generate future taxable income in the United States and certain non-U.S. jurisdictions. Each period, we evaluate the need for a valuation allowance for our deferred tax assets and, if necessary, we adjust the valuation allowance so that net deferred tax assets are recorded only to the extent we conclude it is more likely than not that these deferred tax assets will be realized. If our outlook for future taxable income changes significantly, our assessment of the need for a valuation allowance may also change.

        Assessing Goodwill and Other Long-lived Assets for Impairment.    We account for goodwill in accordance with ASC 350, Intangibles—Goodwill and Other. As permitted by ASC 350, we perform a qualitative assessment in determining whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying

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amount. Based on the qualitative assessment, if it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company is not required to perform the two-step goodwill impairment test.

        In accordance with ASC 360-05-4, Impairment or Disposal of Long-lived Assets, we test other long-lived assets, including property, equipment and leasehold improvements and other intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying values of those assets may not be recoverable. We assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using the same approaches indicated above for ASC 360 step two and compare it to its carrying value. The excess of the carrying value over the fair value is allocated pro rata to derive the adjusted carrying value of each asset in the asset group. The adjusted carrying value of each asset in the asset group is not reduced below its fair value.

Recent Accounting Pronouncements

        See "Item 8. Financial Statements and Supplementary Data, Note 1. Basis of Presentation and Summary of Significant Accounting Policies" for information regarding the effect of new accounting pronouncements on our financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We have exposure to market risks due to the volatility of interest rates, foreign currency exchange rates, equity and bond markets. A portion of these risks are hedged, but fluctuations could impact our results of operations, financial position and cash flows. Additionally, we have exposure to downgrades in the credit ratings of our counterparties as well as exposure related to our credit rating changes.

        Interest Rate Risk.    Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. As of June 28, 2013, the Company had no material available-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no material available-for-sale securities were other-than-temporarily impaired as of June 28, 2013. We currently do not use derivative financial instruments in our investment portfolio.

        We have fixed rate debt obligations. We enter into debt obligations for general corporate purposes including capital expenditures and working capital needs. We currently do not use interest rate derivatives to hedge interest rate exposure on our outstanding debt.

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        The table below presents principal amounts and related weighted average interest rates by year of maturity for our investment portfolio and debt obligations as of June 28, 2013. All short-term investments mature in four years or less.


Fiscal Years Ended

(Dollars in millions, except percentages)
  2014   2015   2016   2017   2018   Thereafter   Total   Fair Value
at
June 28, 2013
 

Assets

                                                 

Cash equivalents:

                                                 

Fixed rate

  $ 1,528   $   $   $   $   $   $ 1,528   $ 1,528  

Average interest rate

    0.07 %                                 0.07 %      

Short-term investments:

                                                 

Fixed rate

  $ 105   $ 150   $ 161   $ 40   $ 13   $   $ 469   $ 478  

Average interest rate

    0.62 %   0.75 %   0.97 %   2.01 %   2.47 %         0.95 %      

Long-term investments:

                                                 

Variable rate

  $   $   $   $   $   $ 17   $ 17   $ 15  

Average interest rate

                                  0.68 %   0.68 %      
                                   

Total fixed income

  $ 1,633   $ 150   $ 161   $ 40   $ 13   $ 17   $ 2,014   $ 2,021  

Average interest rate

    0.11 %   0.75 %   0.97 %   2.01 %   2.47 %   0.68 %   0.28 %      

Debt

                                                 

Fixed rate

  $ 3   $ 2   $   $ 335   $   $ 2,437   $ 2,777     2,860  

Average interest rate

    0.89 %   0.90 %         6.80 %         6.12 %   6.17 %      

        Foreign Currency Exchange Risk.    We may enter into foreign currency forward exchange contracts to manage exposure related to certain foreign currency commitments and anticipated foreign currency denominated expenditures. Our policy prohibits us from entering into derivative financial instruments for speculative or trading purposes. During fiscal years 2013 and 2012, we did not enter into any hedges of net investments in foreign operations.

        We also hedge a portion of our foreign currency denominated balance sheet positions with foreign currency forward exchange contracts to reduce the risk that our earnings will be adversely affected by changes in currency exchange rates. The changes in fair value of these hedges are recognized in earnings in the same period as the gains and losses from the remeasurement of the assets and liabilities. These foreign currency forward exchange contracts are not designated as hedging instruments under ASC 815, Derivatives and Hedging. All these forward contracts mature within 12 months.

        We evaluate hedging effectiveness prospectively and retrospectively and record any ineffective portion of the hedging instruments in Costs of Revenue on the Consolidated Statements of Operations. We did not have any material net gains (losses) recognized in Costs of Revenue for cash flow hedges due to hedge ineffectiveness or discontinued cash flow hedges during fiscal years 2013 and 2012.

        The table below provides information as of June 28, 2013 about our foreign currency forward exchange contracts. The table is provided in U.S. dollar equivalent amounts and presents the notional

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amounts (at the contract exchange rates) and the weighted average contractual foreign currency exchange rates.

(Dollars in millions, except average contract rate)
  Notional
Amount
  Average
Contract Rate
  Estimated
Fair
Value(1)
 

Foreign currency forward exchange contracts:

                   

Thai baht

  $ 20     29.59   $ (1 )
                 

Total

  $ 20         $ (1 )
                 

(1)
Equivalent to the unrealized net gain (loss) on existing contracts.

        Other Market Risks.    We have exposure to counterparty credit downgrades in the form of credit risk related to our foreign currency forward exchange contracts and our fixed income portfolio. We monitor and limit our credit exposure for our foreign currency forward exchange contracts by performing ongoing credit evaluations. We also manage the notional amount of contracts entered into with any one counterparty, and we maintain limits on maximum tenor of contracts based on the credit rating of the financial institutions. Additionally, the investment portfolio is diversified and structured to minimize credit risk. As of June 28, 2013, we had not have any counterparty credit exposure related to our foreign currency forward exchange contracts. Changes in our corporate issuer credit ratings have minimal impact on our financial results, but downgrades may negatively impact our future transaction costs and our ability to execute transactions with various counterparties.

        We are subject to equity market risks due to changes in the fair value of the notional investments selected by our employees as part of our Seagate Deferred Compensation Plan (the "SDCP") and on certain strategic investments in equity of publicly traded companies. We currently manage our exposure to equity market risks associated with the SDCP liabilities by investing directly in mutual funds that mirror the employees' investment options.

        As of June 28, 2013 we continued to hold auction rate securities with a par value of approximately $17 million, all of which are collateralized by student loans guaranteed by the Federal Family Education Loan Program. Beginning in the March 2008 quarter, these securities have continuously failed to settle at auction. As of June 28, 2013, the estimated fair value of these auction rate securities was $15 million. We believe that the impairments totaling $2 million are temporary as we do not intend to sell these securities and have concluded it is not more likely than not that we will be required to sell the securities before the recovery of the amortized cost basis. As such, the impairment was recorded in Other comprehensive income (loss) and these securities were classified as long-term investments.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


SEAGATE TECHNOLOGY PLC

CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)

 
  June 28,
2013
  June 29,
2012
 

ASSETS

             

Current assets:

             

Cash and cash equivalents

  $ 1,708   $ 1,707  

Short-term investments

    480     411  

Restricted cash and investments

    101     93  

Accounts receivable, net

    1,670     2,319  

Inventories

    854     909  

Deferred income taxes

    115     104  

Other current assets

    484     767  
           

Total current assets

    5,412     6,310  

Property, equipment and leasehold improvements, net

    2,269     2,284  

Goodwill

    476     463  

Other intangible assets

    405     506  

Deferred income taxes

    456     396  

Other assets, net

    225     147  
           

Total Assets

  $ 9,243   $ 10,106  
           

LIABILITIES AND EQUITY

             

Current liabilities:

             

Accounts payable

  $ 1,690   $ 2,286  

Accrued employee compensation

    335     344  

Accrued warranty

    176     235  

Accrued expenses

    407     531  

Current portion of long-term debt

    3      
           

Total current liabilities

    2,611     3,396  

Long-term accrued warranty

    144     128  

Long-term accrued income taxes

    87     84  

Other non-current liabilities

    121     138  

Long-term debt, less current portion

    2,774     2,863  
           

Total Liabilities

    5,737     6,609  

Commitments and contingencies (See Notes 14 and 15)

             

Equity:

             

Seagate Technology plc shareholders' equity:

             

Preferred shares, $0.00001 par value per share—100 million authorized; no shares issued or outstanding

         

Ordinary shares, $0.00001 par value per share—1,250 million authorized; 359,437,036 issued and outstanding at June 28, 2013 and 396,032,905 issued and outstanding at June 29, 2012

         

Additional paid-in capital

    5,286     4,950  

Accumulated other comprehensive loss

    (13 )   (9 )

Accumulated deficit

    (1,778 )   (1,444 )
           

Total Seagate Technology plc Shareholders' Equity

    3,495     3,497  
           

Noncontrolling interest

    11      
           

Total Equity

    3,506     3,497  
           

Total Liabilities and Equity

  $ 9,243   $ 10,106  
           

   

See notes to consolidated financial statements.

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)

 
  Fiscal Years Ended  
 
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

Revenue

  $ 14,351   $ 14,939   $ 10,971  

Cost of revenue

    10,411     10,255     8,825  

Product development

    1,133     1,006     875  

Marketing and administrative

    635     528     445  

Amortization of intangibles

    79     38     2  

Restructuring and other, net

    2     4     18  
               

Total operating expenses

    12,260     11,831     10,165  
               

Income from operations

    2,091     3,108     806  

Interest income

    8     8     7  

Interest expense

    (214 )   (241 )   (214 )

Other, net

    (54 )   7     (20 )
               

Other expense, net

    (260 )   (226 )   (227 )
               

Income before income taxes

    1,831     2,882     579  

(Benefit from) provision for income taxes

    (7 )   20     68  
               

Net income

    1,838     2,862     511  

Less: Net income attributable to noncontrolling interest

             
               

Net income attributable to Seagate Technology plc

  $ 1,838   $ 2,862   $ 511  
               

Net income per share attributable to Seagate Technology plc ordinary shareholders:

                   

Basic

  $ 4.97   $ 6.72   $ 1.13  

Diluted

    4.81     6.49     1.09  

Number of shares used in per share calculations:

                   

Basic

    370     426     451  

Diluted

    382     441     467  

Cash dividends declared per Seagate Technology plc ordinary share

  $ 1.40   $ 0.86   $ 0.18  

   

See notes to consolidated financial statements.

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)

 
  Fiscal Years Ended  
 
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

Net Income

  $ 1,838   $ 2,862   $ 511  

Other comprehensive income (loss), net of tax:

                   

Cash flow hedges

                   

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

        (7 )   39  

Less: reclassification for amounts included in net income

        5     (40 )
               

Net change

        (2 )   (1 )
               

Marketable securities

                   

Change in net unrealized gain (loss) on available-for-sale securities

    21     (3 )   (3 )

Less: reclassification for amounts included in net income

    (23 )   4     3  
               

Net change

    (2 )   1      
               

Post-retirement plans

                   

Change in unrealized loss on post-retirement plans

    (3 )   (3 )   (1 )

Less: reclassification for amounts included in net income

        1      
               

Net change

    (3 )   (2 )   (1 )
               

Foreign currency translation adjustments

    1          
               

Total other comprehensive loss, net of tax

    (4 )   (3 )   (2 )
               

Comprehensive income

    1,834     2,859     509  

Less: Comprehensive income attributable to noncontrolling interest

    1          
               

Comprehensive income attributable to Seagate Technology plc

  $ 1,833   $ 2,859   $ 509  
               

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

 
  Fiscal Years Ended  
 
  June 28,
2013
  June 29,
2012
  July 1,
2011
 

OPERATING ACTIVITIES

                   

Net income

  $ 1,838   $ 2,862   $ 511  

Adjustments to reconcile net income to net cash from operating activities:

                   

Depreciation and amortization

    873     814     754  

Share-based compensation

    76     51     51  

Loss on redemption and repurchase of debt

    141     17     26  

Gain on sale of investments

    (61 )   (12 )    

Gain on sale of property and equipment

    (36 )   (25 )   (23 )

Deferred income taxes

    (70 )   (28 )   46  

Other non-cash operating activities, net

    12     7     15  

Changes in operating assets and liabilities:

                   

Accounts receivable, net

    661     (824 )   (95 )

Inventories

    102     99     (115 )

Accounts payable

    (538 )   157     386  

Accrued employee compensation

    (14 )   145     (64 )

Accrued expenses, income taxes and warranty

    (170 )   54     (28 )

Vendor non-trade receivables

    272     (82 )   (168 )

Other assets and liabilities

    (39 )   27     (32 )
               

Net cash provided by operating activities

    3,047     3,262     1,264  
               

INVESTING ACTIVITIES

                   

Acquisition of property, equipment and leasehold improvements

    (786 )   (636 )   (843 )

Proceeds from the sale of property and equipment

    29     20     77  

Purchases of short-term investments

    (351 )   (454 )   (487 )

Sales of short-term investments

    296     397     159  

Maturities of short-term investments

    38     119     101  

Cash used in acquisition of LaCie S.A., net of cash acquired

    (36 )        

Cash used in acquisition of Samsung HDD assets and liabilities

        (561 )    

Other investing activities, net

    (15 )   1     12  
               

Net cash used in investing activities

    (825 )   (1,114 )   (981 )
               

FINANCING ACTIVITIES

                   

Net proceeds from issuance of long-term debt

    986         1,324  

Repayments of long-term debt and capital lease obligations

    (1,224 )   (670 )   (377 )

Repurchases of ordinary shares

    (1,654 )   (2,426 )   (822 )

Dividends to shareholders

    (518 )   (372 )   (74 )

Proceeds from issuance of ordinary shares under employee stock plans

    259     344     83  

Escrow deposit for acquisition of noncontrolling shares of LaCie S.A. 

    (72 )        

Other financing activities, net

    1     6     (3 )
               

Net cash (used in) provided by financing activities

    (2,222 )   (3,118 )   131  
               

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

    1          
               

Increase (decrease) in cash and cash equivalents

    1     (970 )   414  

Cash and cash equivalents at the beginning of the year

    1,707     2,677     2,263  
               

Cash and cash equivalents at the end of the year

  $ 1,708   $ 1,707   $ 2,677  
               

Supplemental Disclosure of Cash Flow Information

                   

Cash paid for interest

  $ 219   $ 221   $ 193  

Cash paid for income taxes, net of refunds

  $ 48   $ 8   $ 18  

   

See notes to consolidated financial statements.

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SEAGATE TECHNOLOGY PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For Fiscal Years Ended June 28, 2013, June 29, 2012 and July 1, 2011
(In millions)

 
   
  Seagate Technology plc Ordinary Shareholders    
 
 
  Total
Equity
  Number of
Ordinary Shares
  Par
Value of
Shares
  Additional
Paid-in
Capital
  Accumulated
Other
Comprehensive
Loss
  Accumulated
Deficit
  Total   Noncontrolling
Interest
 

Balance at July 2, 2010

  $ 2,724     470   $   $ 3,851   $ (4 ) $ (1,123 ) $ 2,724   $  

Net income

    511                             511     511        

Other comprehensive loss

    (2 )                     (2 )         (2 )      

Issuance of ordinary shares under employee stock plans

    83     12           83                 83        

Repurchases of ordinary shares

    (822 )   (57 )                     (822 )   (822 )      

Dividends to shareholders

    (77 )                           (77 )   (77 )      

Share-based compensation

    51                 51                 51        

Tax benefit from exercise of stock options

    2                 2                 2        

Adjustment to equity component of convertible debt upon redemption

    (7 )               (7 )               (7 )      
                                   

Balance at July 1, 2011

    2,463     425         3,980     (6 )   (1,511 )   2,463      

Net income

    2,862                             2,862     2,862        

Other comprehensive loss

    (3 )                     (3 )         (3 )      

Issuance of ordinary shares under employee stock plans

    344     27           344                 344        

Repurchases of ordinary shares

    (2,426 )   (101 )                     (2,426 )   (2,426 )      

Dividends to shareholders

    (369 )                           (369 )   (369 )      

Share-based compensation

    51                 51                 51        

Issuance of ordinary shares, in connection with the acquisition of Samsung HDD assets and liabilities

    569     45           569                 569        

Tax benefit from exercise of stock options

    6                 6                 6        
                                   

Balance at June 29, 2012

    3,497     396         4,950     (9 )   (1,444 )   3,497      

Net income

    1,838                             1,838     1,838        

Other comprehensive loss

    (4 )                     (5 )         (5 )   1  

Issuance of ordinary shares under employee stock plans

    259     17           259                 259        

Repurchases of ordinary shares

    (1,654 )   (54 )                     (1,654 )   (1,654 )      

Dividends to shareholders

    (518 )                           (518 )   (518 )      

Share-based compensation

    76                 76                 76        

Acquisition of majority shares of LaCie S.A. 

    72                                         72  

Purchase of additional subsidiary shares from noncontrolling interest

    (61 )                     1           1     (62 )

Tax benefit from exercise of stock options

    1                 1                 1        
                                   

Balance at June 28, 2013

  $ 3,506     359   $   $ 5,286   $ (13 ) $ (1,778 ) $ 3,495   $ 11  
                                   

   

See notes to consolidated financial statements.

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SEAGATE TECHNOLOGY PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Summary of Significant Accounting Policies

        The Company is a leading provider of data storage products. Its principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. Hard disk drives are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drives are used as the primary medium for storing electronic data.

        The Company produces a broad range of electronic data storage products addressing enterprise applications, where its products are designed for enterprise servers, mainframes and workstations; client compute applications, where its products are designed for desktop and notebook computers; and client non-compute applications, where its products are designed for a wide variety of end user devices such as digital video recorders (DVRs), gaming consoles, personal data backup systems, portable external storage systems and digital media systems. The Company sells its products primarily to major original equipment manufacturers (OEMs), distributors and retailers. In addition to manufacturing and selling disk drives, the Company provides storage services for small- to medium-sized businesses, including online backup, data protection and recovery solutions.

        The consolidated financial statements include the accounts of the Company and all its wholly-owned and majority-owned subsidiaries, after elimination of intercompany transactions and balances.

        The preparation of financial statements in accordance with accounting principles generally accepted in the United States also requires management to make estimates and assumptions that affect the amounts reported in the Company's consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements. The consolidated financial statements reflect, in the opinion of management, all material adjustments necessary to present fairly the consolidated financial position, results of operations, cash flows and shareholders' equity for the periods 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 years 2013, 2012 and 2011 were comprised of 52 weeks and ended on June 28, 2013, June 29, 2012, and July 1, 2011, respectively. All references to years in the Notes to Consolidated Financial Statements represent fiscal years unless otherwise noted.

        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 are primarily comprised of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. With the exception of restricted cash and investments, held for its non-qualified deferred compensation plan, which are classified as trading securities, the Company has classified its entire investment portfolio as available-for-sale and it is stated at fair value with unrealized gains and losses included in Accumulated other comprehensive loss, which is a component of Shareholders' Equity. The Company evaluates the available-for sale securities in an unrealized loss position for other-than-temporary impairment. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are

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SEAGATE TECHNOLOGY PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

included in interest income. Realized gains and losses are included in Other, net. The cost of securities sold is based on the specific identification method.

        Restricted Cash and Investments.    Restricted cash and investments represents cash and cash equivalents and investments that are restricted as to withdrawal or use for other than current operations.

        Allowances for Doubtful Accounts.    The Company maintains an allowance for uncollectible accounts receivable based upon expected collectability. This reserve is established based upon historical trends, global macroeconomic conditions and an analysis of specific exposures. The provision for doubtful accounts is recorded as a charge to Marketing and administrative expense.

        Inventory.    Inventories are valued at the lower of cost (using the first-in, first-out method) or market. Market value is based upon an estimated average selling price reduced by estimated cost of completion and disposal.

        Property, Equipment and Leasehold Improvements.    Property, equipment 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. The costs of additions and substantial improvements to property, equipment and leasehold improvements, which extend the economic life of the underlying assets, are capitalized. The cost of maintenance and repairs to property, equipment and leasehold improvements is expensed as incurred.

        Assessment of Goodwill and Other Long-lived Assets for Impairment.    The Company accounts for goodwill in accordance with Accounting Standards Codification (ASC) Topic 350 (ASC 350), Intangibles—Goodwill and Other. During fiscal year 2012, the Company adopted ASU No. 2011-08, Intangibles—Goodwill and Other (ASC Topic 350)—Testing Goodwill for Impairment. The Company performs a qualitative assessment at the end of each reporting period to determine if any events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry that would indicate that it would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill.

        The Company tests other long-lived assets, including property, equipment and leasehold improvements and other intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying value of those assets may not be recoverable. The Company performs a recoverability test to assess the recoverability of an asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group and the excess of the carrying value over the fair value is allocated pro rata to derive the adjusted carrying value of assets in the asset group. The adjusted carrying value of each asset in the asset group is not reduced below its fair value.

        In July 2012, the Company early adopted ASU No. 2012-02, Intangibles—Goodwill and Other (ASC Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment. The Company tests other intangible assets not subject to amortization whenever events occur or circumstances change, such as declining financial performance, deterioration in the environment in which the entity operates or deteriorating macroeconomic conditions that have a negative effect on future expected earnings and cash flows that could affect significant inputs used to determine the fair value of the indefinite-lived intangible asset.

        Derivative Financial Instruments.    The Company applies the requirements of ASC Topic 815 (ASC 815), Derivatives and Hedging. ASC 815 requires that all derivatives be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships.

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SEAGATE TECHNOLOGY PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

        Establishment of Warranty Accruals.    The Company estimates probable product warranty costs at the time revenue is recognized. The Company generally warrants its products for a period of 1 to 5 years. The Company's warranty provision considers estimated product failure rates and trends (including the timing of product returns during the warranty periods), and estimated repair or replacement costs related to product quality issues, if any. The Company also exercises judgment in estimating its ability to sell certain repaired disk drives. Should actual experience in any future period differ significantly from its estimates, the Company's future results of operations could be materially affected.

        Revenue Recognition, Sales Returns and Allowances, and Sales Incentive Programs.    The Company's revenue recognition policy complies with ASC Topic 605 (ASC 605), Revenue Recognition. Revenue from sales of products, including sales to distribution customers, is generally recognized when title and risk of loss has passed to the buyer, which typically occurs upon shipment from the Company or third party warehouse facilities, persuasive evidence of an arrangement exists, including a fixed or determinable price to the buyer, and when collectability is reasonably assured. Revenue from sales of products to certain direct retail customers and to customers in certain indirect retail channels is recognized on a sell-through basis.

        The Company records estimated product returns at the time of shipment. The Company also estimates reductions to revenue for sales incentive programs, such as price protection, and volume incentives, and records such reductions when revenue is recorded. The Company establishes certain distributor and OEM sales programs aimed at increasing customer demand. For OEM sales, rebates are typically based on an OEM customer's volume of purchases from Seagate or other agreed upon rebate programs. For the distribution channel, these programs typically involve rebates related to a distributor's level of sales, order size, advertising or point of sale activity and price protection adjustments. The Company provides for these obligations at the time that revenue is recorded based on estimated requirements. Marketing development programs are either recorded as a reduction to revenue or as an addition to marketing expense depending on the contractual nature of the program.

        Shipping and Handling.    The Company includes costs related to shipping and handling in Cost of revenue for all periods presented.

        Restructuring Costs.    The Company records restructuring activities including costs for one-time termination benefits in accordance with ASC Topic 420 (ASC 420), Exit or Disposal Cost Obligations. The timing of recognition for severance costs accounted for under ASC 420 depends on whether employees are required to render service until they are terminated in order to receive the termination benefits. If employees are required to render service until they are terminated in order to receive the termination benefits, a liability is recognized ratably over the future service period. Otherwise, a liability is recognized when management has committed to a restructuring plan and has communicated those actions to employees. Employee termination benefits covered by existing benefit arrangements are recorded in accordance with ASC Topic 712, Non-retirement Postemployment Benefits. These costs are recognized when management has committed to a restructuring plan and the severance costs are probable and estimable.

        Advertising Expense.    The cost of advertising is expensed as incurred. Advertising costs were approximately $51 million, $39 million and $21 million in fiscal years 2013, 2012 and 2011, respectively.

        Stock-Based Compensation.    The Company accounts for stock-based compensation under the provisions of ASC Topic 718 (ASC 718), Compensation—Stock Compensation. The Company has elected to apply the with-and-without method to assess the realization of excess tax benefits.

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        Accounting for Income Taxes.    The Company accounts for income taxes pursuant to ASC Topic 740 (ASC 740), Income Taxes. In applying ASC 740, the Company makes certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of tax credits, recognition of income and deductions and calculation of specific tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as tax liabilities associated with uncertain tax positions. The calculation of tax liabilities involves uncertainties in the application of complex tax rules and the potential for future adjustment of the Company's uncertain tax positions by the Internal Revenue Service or other tax jurisdictions. If estimates of these tax liabilities are greater or less than actual results, an additional tax benefit or provision will result. The deferred tax assets the Company records each period depend primarily on the Company's ability to generate future taxable income in the United States and certain non-U.S. jurisdictions. Each period, the Company evaluates the need for a valuation allowance for its deferred tax assets and, if necessary, adjusts the valuation allowance so that net deferred tax assets are recorded only to the extent the Company concludes it is more likely than not that these deferred tax assets will be realized. If the Company's outlook for future taxable income changes significantly, the Company's assessment of the need for a valuation allowance may also change.

        Comprehensive Income.    In the first quarter of fiscal 2013, we adopted the revised requirements of ASU No. 2011-05, Comprehensive Income (Topic 220)—Presentation of Comprehensive Income to present comprehensive income in a separate statement. Comprehensive income is comprised of net income and other gains and losses affecting equity that are excluded from net income.

        Foreign Currency Remeasurement and Translation.    The U.S. dollar is the functional currency for the majority of the Company's foreign operations. Monetary assets and liabilities denominated in foreign currencies are remeasured into the functional currency of the subsidiary at the balance sheet date. The gains and losses from the remeasurement of foreign currency denominated balances into the functional currency of the subsidiary are included in Other, net of the Company's Consolidated Statements of Operations.

        The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in foreign currency translation included in Accumulated other comprehensive loss in shareholders' equity. The Company's subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property, and nonmonetary assets and liabilities at historical rates. Gains and losses from these remeasurements were not significant and have been included in the Company's results of operations.

        Concentration of Credit Risk.    The Company's customer base for disk drive products is concentrated with a small number of OEMs and distributors. The Company does not generally require collateral or other security to support accounts receivable. To reduce credit risk, the Company performs ongoing credit evaluations on its customers' financial condition. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information. Hewlett-Packard Company and Dell Inc. each accounted for more than 10% of the Company's accounts receivable as of June 28, 2013.

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        Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments and foreign currency forward exchange contracts. The Company further mitigates concentrations of credit risk in its investments through diversification, by limiting its investments in the debt securities of a single issuer, and investing in highly rated securities.

        In entering into foreign currency forward exchange contracts, the Company assumes the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The counterparties to these contracts are major multinational commercial banks, and the Company has not incurred and does not expect any losses as a result of counterparty defaults.

        Supplier Concentration.    Certain of the raw materials, components and equipment used by the Company in the manufacture of its products are available from a sole supplier or a limited number of suppliers. Shortages could occur in these essential materials and components due to an interruption of supply or increased demand in the industry. If the Company were unable to procure certain materials, components or equipment at acceptable prices, it would be required to reduce its manufacturing operations, which could have a material adverse effect on its results of operations. In addition, the Company has made prepayments to certain suppliers. Should these suppliers be unable to deliver on their obligations or experience financial difficulty, the Company may not be able to recover these prepayments.

        In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (ASC Topic 220) Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The ASU requires an entity to report information, either on the face of the statement where net income is presented or in the notes, about the amounts reclassified out of accumulated other comprehensive income by component and to report significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The ASU is effective for the Company's first quarter of fiscal year 2014. Other than requiring additional disclosures, the adoption of this new guidance will not have a material impact on the Company's consolidated financial statements.

        In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (ASC Topic 210)—Disclosures about Offsetting Assets and Liabilities. The ASU requires enhanced disclosures on offsetting, including disclosing gross and net information about instruments and transactions eligible for offset and instruments and transactions subject to an agreement similar to a master netting arrangement. The ASU is effective for the Company's first quarter of fiscal year 2014 and requires the enhanced disclosures for all comparative periods presented. Other than requiring additional disclosures, the adoption of this new guidance will not have a material impact on the Company's consolidated financial statements.

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2. Balance Sheet Information

        The following table summarizes, by major type, the fair value and amortized cost of the Company's investments as of June 28, 2013:

(Dollars in millions)
  Amortized
Cost
  Unrealized
Gain/(Loss)
  Fair
Value
 

Available-for-sale securities:

                   

Money market funds

  $ 804   $   $ 804  

Commercial paper

    655         655  

Corporate bonds

    211         211  

U.S. treasuries and agency bonds

    96         96  

Certificates of deposit

    154         154  

Auction rate securities

    17     (2 )   15  

Equity securities

    4         4  

Other debt securities

    107     (1 )   106  
               

    2,048     (3 )   2,045  

Trading securities

    74     5     79  
               

Total

  $ 2,122   $ 2   $ 2,124  
               

Included in Cash and cash equivalents

              $ 1,528  

Included in Short-term investments

                480  

Included in Restricted cash and investments

                101  

Included in Other assets, net

                15  
                   

Total

              $ 2,124  
                   

        The Company's available-for-sale securities include investments in auction rate securities. Beginning in fiscal year 2008, the Company's auction rate securities failed to settle at auction and have continued to fail through June 28, 2013. Since the Company continues to earn interest on its auction rate securities at the maximum contractual rate, there have been no payment defaults with respect to such securities, and they are all collateralized, the Company expects to recover the entire amortized cost basis of these auction rate securities. The Company does not intend to sell these securities and has concluded it is not more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. As such, the Company believes the impairments totaling $2 million are not other-than-temporary and therefore have been recorded in Accumulated other comprehensive loss. Given the uncertainty as to when the liquidity issues associated with these securities will improve, these securities were classified within Other assets, net in the Company's Consolidated Balance Sheets.

        As of June 28, 2013, the Company's Restricted cash and investments consisted of $79 million in cash equivalents and investments held in trust for payment of its non-qualified deferred compensation plan liabilities and $22 million in cash and investments held as collateral at banks for various performance obligations. As of June 29, 2012, the Company's Restricted cash and investments consisted of $73 million in cash and investments held in trust for payment of its non-qualified deferred compensation plan liabilities and $20 million in cash and investments held as collateral at banks for various performance obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

        As of June 28, 2013, the Company had no material available-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no material available-for-sale securities were other-than-temporarily impaired as of June 28, 2013.

        The fair value and amortized cost of the Company's investments classified as available-for-sale at June 28, 2013 by remaining contractual maturity was as follows:

(Dollars in millions)
  Amortized
Cost
  Fair
Value
 

Due in less than 1 year

  $ 1,628   $ 1,628  

Due in 1 to 5 years

    399     398  

Thereafter

    17     15  
           

Total

  $ 2,044   $ 2,041  
           

        Equity securities which do not have a contractual maturity date are not included in the above table.

        The following table summarizes, by major type, the fair value and amortized cost of the Company's investments as of June 29, 2012:

(Dollars in millions)
  Amortized
Cost
  Unrealized
Gain/(Loss)
  Fair
Value
 

Available-for-sale securities:

                   

Commercial paper

  $ 393   $   $ 393  

Money market funds

    1,158         1,158  

U.S. treasuries and agency bonds

    98     1     99  

Certificates of deposit

    6         6  

Corporate bonds

    208     1     209  

Auction rate securities

    17     (2 )   15  

Other debt securities

    99     (1 )   98  
               

    1,979     (1 )   1,978  

Trading securities

    73         73  
               

Total

  $ 2,052   $ (1 ) $ 2,051  
               

Included in Cash and cash equivalents

              $ 1,532  

Included in Short-term investments

                411  

Included in Restricted cash and investments

                93  

Included in Other assets, net

                15  
                   

Total

              $ 2,051  
                   

        As of June 29, 2012, with the exception of the Company's auction rate securities, the Company had no material available-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no material available-for-sale securities were other-than-temporarily impaired as of June 29, 2012.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Dollars in millions)
  June 28,
2013
  June 29,
2012
 

Accounts receivable

  $ 1,678   $ 2,329  

Allowance for doubtful accounts

    (8 )   (10 )
           

  $ 1,670   $ 2,319  
           

        Activity in the allowance for doubtful accounts is as follows:

(Dollars in millions)
  Balance at
Beginning of
Period
  Charges to
Operations
  Deductions(1)   Assumed from
LaCie S.A.
  Balance at
End of
Period
 

Fiscal year ended July 1, 2011

  $ 10   $ 1   $ (1 ) $   $ 10  

Fiscal year ended June 29, 2012

  $ 10   $ 3   $ (3 ) $   $ 10  

Fiscal year ended June 28, 2013

  $ 10   $ (2 ) $ (1 ) $ 1   $ 8  

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

(Dollars in millions)
  June 28,
2013
  June 29,
2012
 

Raw materials and components

  $ 213   $ 265  

Work-in-process

    231     245  

Finished goods

    410     399  
           

  $ 854   $ 909  
           

(Dollars in millions)
  June 28,
2013
  June 29,
2012
 

Vendor non-trade receivables

  $ 329   $ 601  

Other

    155     166  
           

  $ 484   $ 767  
           

        Other current assets include non-trade receivables from certain manufacturing vendors resulting from the sale of components to these vendors who manufacture completed sub-assemblies or finished goods for the Company. The Company does not reflect the sale of these components in revenue and does not recognize any profits on these sales. The costs of the completed sub-assemblies are included in inventory upon purchase from the vendors.

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(Dollars in millions)
  Useful Life
in Years
  June 28,
2013
  June 29,
2012
 

Land and land improvements

      $ 44   $ 29  

Equipment

  3 – 5     6,838     6,495  

Buildings and leasehold improvements

  Up to 48     1,401     1,233  

Construction in progress

        261     263  
               

        8,544     8,020  

Less accumulated depreciation and amortization

        (6,275 )   (5,736 )
               

      $ 2,269   $ 2,284  
               

        Depreciation expense, which includes amortization of leasehold improvements, was $727 million, $739 million and $748 million for fiscal years 2013, 2012, and 2011, respectively. Interest on borrowings related to eligible capital expenditures is capitalized as part of the cost of the qualified assets and amortized over the estimated useful lives of the assets. During fiscal years 2013, 2012, and 2011, the Company capitalized interest of $10 million, $4 million and $5 million, respectively.

3. Acquisitions

        On August 3, 2012 the Company acquired 23,382,904 (or approximately 64.5%) of the outstanding shares of LaCie S.A. ("LaCie") for a price of €4.05 per share with a price supplement of €0.12 per share, which would have been payable if the Company had successfully acquired at least 95% of the outstanding shares of LaCie within 6 months of the acquisition. Of the amount paid at the acquisition date, €9 million is treated as compensation cost to one of the selling shareholders, who is now an employee of the Company, to be recognized over a period of 36 months from the acquisition date, and may be refunded to the Company if the selling shareholder is no longer employed at the end of that period. The transaction and related agreements are expected to accelerate the Company's growth strategy in the expanding consumer storage market, particularly in Europe, Japan and in premium distribution channels.

        The acquisition-date fair value of the consideration transferred for the business combination totaled $111 million, including cash paid of $107 million, and contingent consideration of $4 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

        The following table summarizes the estimated fair values of the assets acquired, liabilities assumed, and noncontrolling interest at the acquisition date (in millions):

Cash and cash equivalents

  $ 71  

Accounts receivable

    29  

Marketable securities

    27  

Inventories

    46  

Other current and non-current assets

    19  

Property, plant and equipment

    12  

Intangible assets

    45  

Goodwill

    13  
       

Total assets

    262  
       

Accounts payable and accrued expenses

    (73 )

Current and non-current portion of long-term debt

    (6 )
       

Total liabilities

    (79 )
       

Noncontrolling interest

    (72 )
       

Total

  $ 111  
       

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

(Dollars in millions)
  Fair Value   Weighted-
Average
Amortization
Period

Customer relationships

  $ 31   5.0 years

Existing technology

    1   5.0 years

Trade name

    13   5.0 years
         

Total acquired identifiable intangible assets

  $ 45    
         

        Since the acquisition date, the Company recorded adjustments to the fair value of certain assets acquired and liabilities assumed with LaCie S.A. that resulted in a net increase of $1 million to Goodwill, and a corresponding decrease in Intangible assets.

        The goodwill recognized is attributable primarily to the benefits the Company expects to derive from LaCie's brand recognition and the acquired workforce, and is not deductible for income tax purposes. The acquisition date fair value of the noncontrolling interest is based on the market price of their publicly traded shares as of the first trading date subsequent to the acquisition, as the shares did not trade on the acquisition date.

        The Company incurred $1 million of expenses related to the acquisition of LaCie during fiscal year 2013, which are included within Marketing and administrative expense on the Consolidated Statement of Operations. Additionally, the €0.12 supplement was not paid as only 94.5% of the LaCie business was acquired within six months of the acquisition date, resulting in a reversal of the contingent consideration liability which was recorded as a reduction of Marketing and administrative expenses of $4 million.

        The amounts of revenue and earnings of LaCie included in the Company's Consolidated Statement of Operations from the acquisition date are not significant.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

        The Company deposited $72 million into an escrow account with the intention of acquiring the remaining publicly held shares of LaCie through public and private transactions. As of June 28, 2013, a total of $61 million of the Company's deposit had been used to acquire an additional 30% of the outstanding shares, resulting in an ending ownership interest of approximately 94.5%. The use of this deposit is treated as a non-cash financing activity and excluded from the Statement of Cash Flows.

        On December 19, 2011, the Company completed the acquisition of Samsung Electronics Co., Ltd's ("Samsung") hard disk drive business pursuant to an Asset Purchase Agreement ("APA") by which the Company acquired certain assets and liabilities of Samsung relating to the research and development, manufacture and sale of hard-disk drives. The transaction and related agreements are expected to improve the Company's position as a supplier of 2.5-inch products; position the Company to better address rapidly evolving opportunities in markets including, but not limited to, mobile computing, cloud computing and solid state storage; expand the Company's customer access in China and Southeast Asia; and accelerate time to market for new products.

        The acquisition-date fair value of the consideration transferred totaled $1,140 million, which consisted of $571 million of cash, $10 million of which was paid as a deposit upon signing the APA in the fourth quarter of fiscal year 2011, and 45.2 million ordinary shares with a fair value of $569 million. The fair value of the ordinary shares issued was determined based on the closing market price of the Company's ordinary shares on the acquisition date, less a 16.5% discount for lack of marketability as the shares issued are subject to a restriction that limits their trade or transfer for approximately a one year period.

        The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Inventories

  $ 141  

Equipment

    76  

Intangible assets

    580  

Other assets

    28  
       

Total identifiable assets acquired

    825  
       

Warranty liability

    (72 )

Other liabilities

    (45 )
       

Total liabilities assumed

    (117 )
       

Net identifiable assets acquired

    708  

Goodwill

    432  
       

Net assets acquired

  $ 1,140  
       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

(Dollars in millions)
  Fair Value   Weighted-
Average
Amortization
Period

Existing technology

  $ 137   2.0 years

Customer relationships

    399   5.8 years
         

Total amortizable intangible assets acquired

    536   4.8 years

In-process research and development

    44    
         

Total acquired identifiable intangible assets

  $ 580    
         

        During fiscal year 2012, the Company recorded adjustments to the fair value of certain assets acquired and liabilities assumed with the Samsung HDD business that resulted in a net decrease of $5 million to goodwill. These adjustments included a $7 million increase in other assets for spare parts and a $3 million increase to equipment, offset by a $3 million increase in warranty liability and a $2 million increase in other liabilities related to certain assumed vendor obligations. These adjustments were based on information about facts and circumstances that existed at the acquisition date.

        The $432 million of goodwill recognized is attributable primarily to the benefits the Company expects to derive from enhanced scale and efficiency to better serve its markets and expanded customer presence in China and Southeast Asia. Except for approximately $4 million of goodwill relating to assembled workforce in Korea, none of the goodwill is expected to be deductible for income tax purposes.

        The Company incurred a total of $22 million of expenses related to the acquisition of Samsung in fiscal year 2012, which are included within Marketing and administrative expense on the Consolidated Statement of Operations.

        The amounts of revenue and earnings of the acquired assets of Samsung's HDD business included in the Company's Consolidated Statement of Operations from the acquisition date to the period ended June 29, 2012, were as follows:

(Dollars in millions)
   
 

Revenue

  $ 970  

Net income

  $ 104  

        The unaudited pro forma financial results presented below for fiscal years ended June 29, 2012 and July 1, 2011, include the effects of pro forma adjustments as if the acquisition date occurred as of the beginning of the prior fiscal year on July 3, 2010. The pro forma results combine the historical results of the Company for the fiscal years ended June 29, 2012 and July 1, 2011, respectively, and the historical results of the acquired assets and liabilities of Samsung's HDD business, and include the effects of certain fair value adjustments and the elimination of certain activities excluded from the transaction. The pro forma financial information is presented for informational purposes only and is not necessarily indicative

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the earliest period presented, nor is it intended to be a projection of future results.

 
  Fiscal Years Ended  
(Dollars in millions)
  June 29,
2012
  July 1,
2011
 

Revenue

  $ 16,113   $ 13,853  

Net income

  $ 2,761   $ 370  

        The pro forma results for the fiscal years ended June 29, 2012 and July 1, 2011, include adjustments of $65 million and $115 million, respectively, to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on July 3, 2010.

4. Goodwill and Other Long-lived Assets

        The changes in the carrying amount of goodwill are as follows:

(Dollars in millions)
   
 

Balance as of July 1, 2011

  $ 31  

Goodwill acquired

    432  
       

Balance as of June 29, 2012

    463  

Goodwill acquired

    13  
       

Balance as of June 28, 2013

  $ 476  
       

        Other intangible assets consist primarily of existing technology, customer relationships and in-process research and development acquired in business combinations. With the exception of in-process research and development, acquired intangibles are amortized on a straight-line basis over the respective estimated useful lives of the assets. Amortization of the existing technology intangible asset is charged to Cost of revenue while the amortization of the other intangible assets is included in Operating expenses in the Consolidated Statements of Operations. In-pr