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Seagate Technology Buyout Harvard Business School Case #201-063 Case Software #XLS042

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Table A

Market Share in the Worldwide Disk Drive Industry, 1999 Total Marketa

Number of units shipped Seagate Quantum IBM Maxtor Fujitsu Western Digital Samsung

0.211 17.1 14 13.3 12.3 11.1 5.9

Total sales ($millions)

25273

Source: “Disk Drive Quarterly Report” (March 2000) by Salomon Smith Barney. aIncludes mobile. bAmount is not material.

Enterprise Desktop

0.41 7.2 34.6 b 8.8 3.8 b

0.211 20.5 6.1 17.7 12.4 14.6 7.5

7438

14627

Exhibit 1

Worldwide Hard Disk Drive Industry Historical Performance and Projections, 1991-2003E 1991

Total Sales (000s of units) Y/Y % Change Total Revenues (millions of $) Y/Y % Change

1992

1993

1994

33.1

38.4 16%

51.8 35%

69 33%

24300

26200 8%

21730 -17%

22966 6%

Source: Computer Industry Abstracts (various issues) and “Disk Drive Quarterly Report” (June 1999) by Salomon Smith Barney.

1995

1996

1997

1998

1999

2000E

2001E

2002E

2003E

90 30%

106.8 19%

129.3 21%

143.6 11%

165.9 16%

187.8 13%

212.5 13%

238.1 12%

268.2 13%

22991 0%

27596 20%

27340 -1%

25483 -7%

25273 -1%

26640 5%

28409 7%

30450 7%

32699 7%

99) by Salomon Smith Barney.

Exhibit 2

Historical Operating Performance and Capitalization Ratios for Seagate Technology and U.S. Disk Drive Industry (198 1981

1982

1983

1984

1985

1986

1987

Sales % Growth

9.79

40.45 313%

110.41 173%

343.9 211%

214.65 -38%

459.84 114%

958.07 108%

EBITDA % Sales

0.87 9%

10.7 26%

18.82 17%

63.51 18%

0.07 0%

58.34 13%

208.24 22%

EBIT % Sales

0.65 7%

9.89 24%

16.16 15%

55.72 16%

-12.01 -6%

39.18 9%

180.63 19%

Assets Depreciation & Amortization CAPX

9.47 0.22 2.45

43.47 0.81 5.04

157.25 2.65 38.83

214.72 7.8 42.66

275.23 12.08 31.22

305.08 19.17 38.68

814.12 27.6 78.4

Debt/Book Assets Debt/Mkt. Assets (Debt-Cash)/Book Assets (Debt-Cash)/Market Assets EBITDA Interest Coverage EBIT Interest Coverage

19%

10.12 7.56

1% 0% -27% -6% 57.84 53.46

5% 1% -10% -2% 47.05 40.4

5% 2% -2% -1% 73.51 64.49

13% 9% 11% 7% 0.04 -6.84

5% 2% -10% -5% 20.26 13.61

37% 14% -11% -4% 41.01 35.57

9% 5% 19% 7% 9% 0% 3.31 2.19

6% 3% 9% 4% -5% -2% 3.46 1.42

7% 3% 5% 1% -12% -6% 4.12 2.34

1% -4% 12% 5% -6% -2% -1.58 -3.37

-4% -10% 19% 7% -5% -3% -3.19 -7.57

9% 5% 13% 5% -7% -4% 6.2 2.25

8% 5% 16% 7% -11% -4% 6.37 1.94

Seagate

NA 18% NA

Disk Drive Industry Medians EBITDA as % of Sales EBIT as % of Sales Debt/Book Assets Debt/Mkt. Assets (Debt-Cash)/Book Assets (Debt-Cash)/Mkt Assets EBITDA Interest Coverage EBIT Interest Coverage

Source: Casewriters’ estimates based on data compiled from Compustat.

and U.S. Disk Drive Industry (1981 to 1999) 1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1265.97 1371.57 2413.18 2676.98 2875.27 32% 8% 76% 11% 7%

3043.6 6%

3500.1 4539.57 8588.35 8940.02 15% 30% 89% 4%

150.77 12%

90.97 7%

297.24 12%

255.57 10%

309.04 11%

439.05 14%

449.17 13%

629.85 1004.53 1521.03 14% 12% 17%

100.4 8%

12.96 1%

179.32 7%

117.31 4%

139.91 5%

284.03 9%

310.96 9%

442.98 10%

1093.95 1076.77 1851.46 1880.06 50.37 78.02 117.91 138.26 284.41 78.09 102.38 90.87

627.38 1019.83 7% 11%

1816.6 2031.19 2877.53 3361.26 5239.64 6722.88 169.13 155.02 138.21 186.86 377.15 501.2 90.66 173.57 197.68 353.43 906.94 890.46

28% 20% 20% 14% 6.88 4.58

29% 24% 11% 9% 3.77 0.54

31% 28% 17% 15% 6.1 3.68

23% 27% 9% 11% 6.01 2.76

18% 16% -10% -9% 9.09 4.11

14% 14% -17% -17% 18.67 12.08

19% 18% -27% -26% 17.05 11.81

16% 12% -21% -15% 19.11 13.44

15% 11% -7% -5% 17.99 11.24

10% 6% -24% -13% 43.66 29.27

6% 2% 12% 8% 0% -3% 8.15 4.58

7% 5% 13% 8% -5% -2% 5.74 2.71

10% 6% 10% 9% -7% -4% 6.03 3.3

9% 4% 13% 8% 2% -1% 4.06 1.55

9% 6% 16% 16% -1% -3% 9 4.31

4% 0% 19% 13% -9% -3% 4.38 -0.05

3% -2% 12% 7% -4% -2% 5.58 0.37

5% 2% 10% 3% -8% -3% 3.59 1.84

7% 4% 13% 4% -6% -5% 7.06 5.04

9% 8% 6% 1% -21% -8% 13 8.52

1998

1999

6819 -24%

6802 0%

1137%

451 7%

1011 15%

239%

-138 -2%

398 6%

153%

5645 589 709

7072 613 603

12% 8% -20% -13% 8.84 -2.71

10% 8% -13% -10% 20.25 8.29

6% -1% 14% 7% -9% -5% 4.2 -2.04

6% 1% 9% 4% -23% -5% -0.09 -2.91

Exhibit 3

Summary Financial Data on Publicly Traded Hard Disk Drive Manufacturers Seagate Technology Jun97 Jun98 Jun99

Quantum HDDa Mar97 Mar98 Mar99

Income Statement ($ million) Sales Cost of Goods Sold Gross Margin EBITDA Depreciation + Amortization Operating Profit Interest Expense Net Income Capital Expenditures

8940 6918 2022 1521 501 1020 35 658 890

6819 5830 989 451 589 -138 51 -530 709

6802 5250 1552 1011 613 398 48 1176 603

Balance Sheet ($ million) Cash and Equivalents Net Receivables Inventories Net Property, Plant, and Equipment TOTAL ASSETS Accounts Payable Short-term Debt Long-term Debt Shareholders’ Equity Net Working Capitalb

2284 1041 808 1787 6723 863 1 702 3476 2717

1827 799 508 1669 5645 577 1 704 2937 2241

1623 NA 872 NA 451 NA 1687 NA 7072 NA 714 NA 1 NA 703 NA 3563 NA 1773 NA

4591 4093 498 146 109 37 20 41 164

4615 4242 373 -6 68 -74 11 -53 119

3599 3308 291 -61 71 -132 9 -153 82

325 586 212 228 1646 401 0 109 906

524 392 148 199 1470 342 0 115 791

739

709

Capital Market Information ($ million) Year-end Market Equity Capitalization Equity Betasc Total Book Debt (3/10/00) Debt Rating Stock Price (3/10/00)—$/share Shares Outstanding (3/10/00)—millions

5861

5844

8620 NA 1.2 704 BBB

NA

NA 0.8 110 B2

64.25 227.2

8.875 82.6

Source: Data compiled from Compustat and SEC Filings. aQuantum HDD was floated in August 1999 as a separately traded subsidiary of Quantum Corporation, containing just the hard bNet Working Capital = Total Current Assets – Total Current Liabilities (excluding Short-Term Debt). cEquity betas estimated using daily returns over the six-month period from 9/1/99 to 3/1/00.

Western Digital Jun97 Jun98 Jun99

Dec96

Maxtor Dec97

Dec98

4178 3464 714 365 63 302 0 268 156

3542 3187 355 -41 107 -148 12 -290 199

2767 2562 205 -188 131 -319 33 -493 107

799 842 -43 -191 47 -238 18 -256 54

1424 1287 137 -32 66 -98 37 -110 82

2409 2034 375 134 74 60 29 31 95

208 546 224 248 1307 418 0 0 620 364

460 369 187 347 1443 330 0 519 318 464

226 273 144 238 1022 336 10 534 -154 72

31 89 81 92 315 110 204 229 -327 93

33 248 155 99 555 207 245 224 -221 440

258 318 153 108 863 428 5 145 169 170

2716

1043

589 NA 0.6 236 B2

NA

7468

670

1320 1 114 B1

5.1875 129.1

11.625 113.2

ration, containing just the hard disk drive operations. As a result, there is no information on historical stock prices or market capitalization,

prices or market capitalization, prior to that date.

Exhibit 5

Summary Financial Data on VERITAS Software VERITAS Software Dec96 Dec97 Dec98

Balance Sheet ($ Million) Cash and Equivalents Net Receivables Inventories Net Property, Plant, and Equipment TOTAL ASSETS Accounts Payable Short-term Debt Long-term Debt Shareholders’ Equity

67.6 16 NA 7 94.5 1.8 0.1 0.5 75

151.3 30.3 NA 10.1 241.9 1.6 0 100 104.2

278.2 52.7 NA 26.5 349.1 5 0 100 169.9

Stock Market Information Total Book Debt (3/10/00)—$ Millions Equity Betaa Stock Price (3/10/00)—$/Share Shares Outstanding (3/10/00)—Millions

451 1.81 168.69 393.6

Source: Compustat and SEC Filings. aEquity beta estimated using daily returns over the six-month period from 9/1/99 to 3/1/00.

Exhibit 8

Projeced Operating Performance of Seagate Disk Drive Business

2000

2001

Year Ending June 30, 2002 2003 2004

Base Case ($ million) Revenues

6619

7417

8564

9504

10416

11359

12350

Gross Margin

1264

1409

1696

2043

2312

2624

3026

EBITA

141

189

316

449

499

614

724

Depreciation

625

626

642

666

708

726

729

Capital Expenditures

627

690

720

795

700

725

750

Upside Case ($ million) Revenues

0 6619 0 141

0.103546 0.184727 0.187184 0.212174 0.229069 0.247287 8185 10146 11283 12626 13961 15404 0.931217 1.18038 0.743875 0.737475 0.628664 0.611878 365 689 783 867 1000 1167

0 6619 0 141

-0.00324 -0.08956 -0.12563 -0.15505 -0.184 -0.2098 7393 7797 8310 8801 9269 9759 0 0.018987 -0.19154 -0.24248 -0.34365 -0.43785 189 322 363 378 403 407

EBITA Downside Case ($ million)a Revenues EBITA

2005

2006

Source: Casewriters’ estimates based on revenues and EBITA projections contained in SEC filings. aThe “downside case” is based on the “buyer case” described in the first VERITAS and Seagate Joint Proxy Statement/Prospectu

Base Case Upside Downside

1 2 3

7417 8185 7393

8564 10146 7797

9504 11283 8310

10416 12626 8801

Base Case Upside Downside

1 2 3

189 365 189

316 689 322

449 783 363

499 867 378

Joint Proxy Statement/Prospectus filed with the SEC in May 2000.

11359 13961 9269 614 1000 403

24% 12350 15404 9759 -20% 724 1167 407 60% -53%

13585 14943.5 16549 18203.9 10868 11954.8 869 1390 408

1043 1668 490

Exhibit 10

AAA 7.01%

Market Interest Rates (March 2000) Corporate Long-term Bonds AA A BBB BB 7.14%

7.31%

7.72%

Source: Standard & Poor’s Datastream.

9.18%

B 10.44%

Government Securities 3 Month 6 Month 30 Year 5.88%

6.15%

5.84%

Exhibit 11

S&P Key Industrial Financial Ratios by Long-Term Debt Rating

AAA EBIT Interest Coverage Total Debt as % of Market Cap.A

17.5x 0.037

Three-Year Medians—1997 to 1999 AA A BBB BB 10.8x 0.092

6.8x 0.164

3.9x 0.304

2.3x 0.475

B

CCC

1.0x 0.593

0.2x 0.743

Source: Standard & Poor’s Credit Week, September 2000. aDefined as the ratio of Total Debt (long term and short term) to Total Market Capitalization (the sum of total debt, minority in

m of total debt, minority interest, preferred equity and year-end market value of equity).

CAPEX DEP Tax Rate Growth

Base Case ($ million) Cases Revenues Gross Margin EBITA Tax EATBIA Depreciation Capital Expenditures Working Capital Change in Working Capital

2000 0 1 6619

7% 8% 40% 10% 2001 1

7417 12.06% 1264 1409 141 189 34.04% 56.4 75.6 84.6 113.4 593.36 463.33 1720.94 1928.42 207.48

FCFF

35.95

TV Discounted Values

6% 8%

5% 7% Growth

7% 20%

Year Ending June 30, 2002 2003 2004 2 3 4 8564 15.46% 1696 316 67.20% 126.4 189.6 685.12 519.19 2226.64 298.22 57.31

9504 10.98% 2043 449 42.09% 179.6 269.4 665.28 599.48 2471.04 244.4 90.8

10416 9.60% 2312 499 11.14% 199.6 299.4 729.12 624.96 2708.16 237.12 166.44

6%

2005 5 11359 9.05% 2624 614 23.05% 245.6 368.4 681.54 681.54 2953.34 245.18 123.22

39.84262 70.3928411 123.604128 251.104143 206.028081

Value Outstanding Shares

7161.462 227.2

Price per Share

31.52052

14597.6

NWC 5.50%

26% 4%

4%

2006 6

2007 7

2008 8

12350 8.72% 3026 724 17.92% 289.6 434.4 679.25 741 3211 257.66

13585 10.00%

14943.5 10.00%

869

1043

347.5 521.3 543.4 679.25 3532.1 321.1

417.0 625.5 597.74 747.175 3885.31 353.21

114.99

64.33

122.9

1869.68582 213.085712 132.116436 4255.601716

Growth Rate WACC

2176

$2,699.78

3% 9.77%

180.67%