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(Mark One)

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

For the quarterly period ended June 28, 2003

OR

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

For the transition period from __________________________ to __________________________.

Commission File Number: 0-18033

EXABYTE CORPORATION
(Exact name of registrant as specified in its charter)

2108 - 55th Street
Boulder, Colorado 80301
(Address of principal executive offices, including zip code)
(303) 442-4333
(Registrant's Telephone Number, including area code)

(Former Address)

Indicate by check 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 ninety days.
Yes ___X___   No ______

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes______   No ___X___ 

As of August 11, 2003, there were 60,951,109 shares outstanding of the Registrant's Common Stock (par value $0.001 per share).

The accompanying notes are an integral part of the consolidated financial statements.

(Unaudited)
(In thousands, except per share data)

The accompanying notes are an integral part of the consolidated financial statements.

(Unaudited)
(In thousands, except per share data)

The accompanying notes are an integral part of the consolidated financial statements.

(Unaudited)
(In thousands)

The accompanying notes are an integral part of the consolidated financial statements.

The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United State of America, or GAAP, have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements, and reflect all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation in accordance with GAAP. The results of operations for interim periods presented are not necessarily indicative of the operating results for the full year. These consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the Company 's Annual Report on Form 10-K for the fiscal year ended December 28, 2002.

The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred operating losses over the last five fiscal years, negative cash flows from operations over the last three fiscal years, and had a stockholders' deficit of $17,349,000 as of June 28, 2003.

The above factors raise substantial doubt about whether the Company can continue as a going concern. Accordingly, the Company continues to reassess its current business plan and investigate various strategic alternatives to increase liquidity. These alternatives may include one or more of the following:

• sale of all or a portion of operating assets;
• restructuring of current operations or reduction in workforce;
• obtaining additional debt or equity capital;
• strategic alliance, acquisition or business combination; or
• restructuring of maturities of long-term obligations, including notes payable to suppliers.

The Company will continue to explore these and other options that would provide additional capital to provide sufficient funds to support its operations. Should the Company not be successful in achieving one or more of these actions, the Company will likely not have sufficient operating capital, and may not be able to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company's sources of capital for operations are currently cash on hand, cash generated from operations and the Company's revolving line of credit with a bank. As of August 14, 2003, the Company had funds available for borrowing under the bank line of credit (including amounts resulting from the over-advance guaranties) of approximately $1,250,000.

The Company's Board of Directors ("Board") has formed a Special Committee to determine the terms and conditions of an equity rights offering to our existing stockholders. However, the Company's Board has not made a final determination on what type of offering would be made. In any case, in order to raise sufficient capital through an equity offering based on the current market prices for the Company's common stock, the Company expects that the number of shares of common stock which may be offered directly or through shares underlying convertible shares would likely result in substantial dilution to existing shareholders.

Due to the Company's continued liquidity constraints, the Company's product suppliers significantly reduced their product shipments during the first four months of 2003. As a result, the Company was unable to fully meet its customer orders, resulting in decreased revenue. Product shipments resumed on a current basis in May 2003. In May 2003, one of the Company's major customers filed bankruptcy, and, during the first quarter of 2003, the Company fully reserved the amount of $5,962,000 on its accounts receivable with this customer. The related bad debt expense is reflected in the Statement of Operations under selling, general and administrative expenses for the six months ended June 28, 2003.

As discussed in Note 5, during the first quarter of 2003, the Company converted certain accounts payable and accrued liability balances due to suppliers to notes payable, in order to maintain an adequate level of liquidity.

During the six months ended June 28, 2003, the Company terminated employment of 107 full- and part-time employees. The Company had paid all severance related to these terminations as of June 28, 2003. Effective in June 2003, the Company terminated an additional 50 full-time employees as a result of an agreement to outsource its repair and service functions (See Note 7). The costs related to this reduction in force, which were recorded in the second quarter of 2003, were not significant.

The Company has recorded a deferred tax valuation allowance equal to 100% of total deferred tax assets. In recording this allowance, management has considered a number of factors, but primarily, the Company's cumulative operating losses over the prior four years. Management has concluded that a valuation allowance is required for 100% of the total deferred tax assets as it is more likely than not that the deferred tax assets will not be realized.

At December 28, 2002, the Company had incurred domestic net operating loss carryforwards of approximately $172,000,000, which expire between 2005 and 2022. Under the Tax Reform Act of 1986, the amount of, and the benefit from, net operating losses that can be carried forward is limited due to a cumulative ownership change of more than 50% over a three-year period, which occurred in November 2001 in connection with the Ecrix merger. The portion of Exabyte's and Ecrix's pre-business combination tax carryovers, totaling $153,000,000, that can be utilized in any one taxable year for federal tax purposes is limited to approximately $1.2 million per year through 2021. Future ownership changes could further limit the utilization of the Company's remaining net operating loss carryforward of $19,000,000, in addition to any losses incurred subsequent to December 28, 2002.

As permitted under Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," the Company accounts for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion ("APB") No. 25 "Accounting for Stock Issued to Employees" and related interpretations. Accordingly, no compensation expense has been recognized for options granted to employees with an exercise price equal to the market value at the date of grant or in connection with the employee stock purchase plan. The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS 123 and related interpretations.

In accordance with the interim disclosure provisions of SFAS No. 148, "Accounting for Stock Based Compensation Transition and Disclosure-an Amendment of SFAS No. 123," the following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value based method of SFAS No. 123 to stock-based compensation.

Certain reclassifications have been made to prior periods' balances to conform with the current periods' presentation.

Inventories, net of reserves for excess quantities and obsolescence, consist of the following:

During the six months ended June 28, 2003, the Company recorded a reserve of $6,849,000 for excess and obsolete inventory due to changes in sales forecasts and planned discontinuance of older tape drive and automation products.

Accrued liabilities consist of the following:

Pursuant to a vendor note agreement entered into in January 2003, the Company reclassified $3,992,000 of purchase commitments to notes payable, of which $3,000,000 is current as of June 28, 2003.

Basic earnings (loss) per share is based on the weighted average of all common shares issued and outstanding, and is calculated by dividing net income (loss) by the weighted average shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares used in the basic earnings (loss) per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding. For loss periods, the basic and diluted shares are equal, as the inclusion of potentially dilutive common shares would be anti-dilutive. The Company has incurred net losses for all periods presented in its Statements of Operations, and accordingly, basic shares equal diluted shares for all periods presented.

Options to purchase 5,631,000 and 17,979,000 shares of common stock were excluded from dilutive stock option calculations for the three-month periods ended June 29, 2002 and June 28, 2003, respectively, because their exercise prices were greater than the average fair market value of the Company's stock for the period, and as such were anti-dilutive. Additionally, options to purchase 7,432,000 shares of common stock were excluded from dilutive stock option calculations for the three-month period ended June 29, 2002, as these options were anti-dilutive as a result of the net loss incurred.

Options to purchase 5,631,000 and 15,603,000 shares of common stock were excluded from dilutive stock option calculations for the six-month periods ended June 29, 2002 and June 28, 2003, respectively, because their exercise prices were greater than the average fair market value of the Company's stock for the period, and as such were anti-dilutive. Additionally, options to purchase 7,432,000 and 2,345,000 shares of common stock were excluded from dilutive stock option calculations for the six-month periods ended June 29, 2002 and June 28, 2003, respectively, as these options were anti-dilutive as a result of the net losses incurred.

The Company has three series of preferred stock, all of which are convertible into the Company's common stock. The assumed conversion of the preferred shares into common stock for the three- and six-month periods ended June 29, 2002 and June 28, 2003, has been excluded from diluted share calculations, as the effect of the conversions is anti-dilutive.

Also, as a result of their anti-dilutive effect, accumulated preferred dividends of 268,000 and 2,082,000 shares of common stock have been excluded from diluted share calculations for the three-month and six-month periods ended June 29, 2002 and June 28, 2003, respectively.

On April 17, 2003, the Company entered into a Third Modification Agreement ("Modification Agreement") of its Loan and Security Agreement dated June 18, 2002 ("Loan Agreement") with Silicon Valley Bank ("SVB"). Pursuant to this Modification Agreement, SVB agreed to advance the Company up to $2,500,000 in excess of its specified borrowing availability up to a maximum of $20,000,000, waive all defaults existing as of April 17, 2003, increase the Company's current credit limit and change the maturity date of the Loan Agreement to September 30, 2003. As a condition of the Modification Agreement, SVB required guaranties ("Guaranties") up to a maximum of $2,500,000 from the Company's CEO and a significant investor ("Guarantors") for advances in excess of the Company's credit limit. In addition, SVB required that each of the Guarantors enter into a subordination agreement ("Subordination Agreement"), whereby each Guarantor agreed to subordinate to SVB: (1) all of the Company's present and future in debtedness and obligations to the Guarantor; and (2) all of the Guarantor's present and future security interests in the Company's assets and property. Also, the Guarantors may not demand any payment, exercise any remedy or participate in any action with respect to the subordinated debt until Exabyte's debts to SVB have been satisfied. The Modification Agreement also requires that the Company provide to SVB its plan to address certain operating issues including but not limited to: (i) consolidating its Colorado operations into a single location; (ii) reducing its inventory; (iii) resolving outstanding issues related to its liabilities with certain vendors; (iv) reducing certain expenses; and (v) identifying segments of its business that may be considered for sale. SVB's agreement to advance amounts in excess of the credit limit will terminate automatically upon the termination of the Guaranties.

On April 17, 2003, the Company issued SVB a fully vested, immediately exercisable and non-forfeitable warrant to purchase 2,000,000 shares of common stock at an exercise price of $0.105 per share pursuant to the Modification Agreement. The warrant expires on April 17, 2010. The Company determined the value of the warrants to be $159,000 based on the Black-Scholes option-pricing model with the following assumptions: no dividend yield, expected life - 7 years, volatility - 135%, and risk free interest rate - 3.5%. The fair value of the warrant is being recognized as interest expense over the term of the Modification Agreement, which expires on September 30, 2003.

As consideration for the Guaranties, the Company issued to the Guarantors (pro-rata) 25,000,000 shares of its common stock on April 21, 2003, and will issue an additional 12,500,000 shares to be effective July 15, 2003. The Company determined the fair value of the issued shares based on the market price of the Company's stock on the date of issuance, and recorded $2,500,000 of non-cash interest-expense during the second quarter. It is expected that the Guaranties will continue through September 30, 2003 and, accordingly, the Guarantors will receive (pro-rata) an additional 12,500,000 shares on and September 15, 2003. The value of the total shares to be issued under the Guaranties is being recorded as interest expense over the anticipated period that such Guaranties will remain in effect. Subsequent to June 28, 2003, the Company entered into agreements with two additional shareholders to guarantee an additional $250,000 of borrowings from SVB in exchange for up to 5,000,000 common shares to be issued in Ju ly, October, and December 2003.

During the first quarter of 2003, the Company entered into note agreements with four of its largest suppliers. The agreements converted certain accounts payable and accrued liability amounts outstanding at December 28, 2002 to notes payable. As of June 28, 2003, the total amount due under the notes is $19,864,000, of which $16,461,000 is current, and the notes require full payment of all amounts due on specified dates during the period from July 2003 through December 2004. As of August 18, 2003, the Company is attempting to renegotiate the terms of the notes to extend the repayment period. The notes bear interest ranging from zero to 5.0%. The Company accounted for the notes under EITF 96-19, 'Debtors Accounting for a Modification or Exchange of Debt Instruments ("EITF 96-19"). In accordance with the guidance in EITF 96-19, the terms of the notes are not considered to be substantially different than the terms of the original liabilities. Accordingly, the notes are recorded at their principa l amounts and the related interest expense is accounted for using the effective interest rate on each note.

All operations of the Company are considered to be in one operating segment and, accordingly, no segment disclosures have been presented. The Company will continue to review the internal reporting structure for future changes that could result in disclosure of additional segments.

The following table details revenues from external customers by geographic area (foreign revenue is based on the country in which the customer is located):

The following table presents revenue by product line:

The following tables summarize sales to major customers:

No other customers accounted for 10% or more of net sales in any of the above periods.

The following table details long-lived asset information by geographic area:

As of June 28, 2003, the Company was in default under two lease agreements for facilities in Boulder, Colorado due to delinquent rental payments. For the first property, which included the Company's headquarters, the landlord terminated the original lease and subsequent short-term lease on June 30, 2003, and the Company ceased use of the building on that date. Remaining lease payments under the original lease total approximately $1,222,000. The Company expects to cease use of the second property on or about August 31, 2003, at which time the remaining rental payments under that lease will total approximately $2,900,000.

The landlord under the first lease has commenced litigation against the Company and has claimed damages relating to the rental default and an alleged failure to maintain the leased premises. The amount of the remaining lease payments are as noted above, and the amount of other damages were not specified.. The Company believes that such damages will be mitigated to an amount less than the claim, although such amount can not presently be determined, and there can be no assurance that the damages will indeed be mitigated.

The Company is, from time to time, subjected to certain other claims, assertions or litigation by outside parties as part of its ongoing business operations. The outcomes of any such contingencies are not expected to have a material adverse impact on the consolidated financial condition, results of operations or cash flows of the Company.

During the normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include intellectual property indemnities to the Company's customers in connection with the sales of its products, indemnities for liabilities associated with the infringement of other parties' technology based upon the Company's products, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnities to directors and officers of the Company to the maximum extent permitted under the laws of the State of Delaware. In addition, the Company has contractual commitments to various customers, which could require it to incur costs to repair an endemic defect with respect to its products outside of the normal warranty period if such defect were to occur. The duration of these indemnities, commitments and guarantees var ies, and in certain cases, is indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments that the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets. The Company does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable.

The Company establishes a warranty liability for the estimated cost of warranty-related claims at the time revenue is recognized. The following table summarizes information related to the Company's warranty reserve as of and for the six-months ended June 28, 2003:

(In thousands)

In July 2003, the Company entered into an agreement to outsource its repair and service functions to an outside third party, Teleplan Service Logistics, Inc. ("Teleplan"). The agreement provided for the Company to sell parts and service inventory to Teleplan and the payment of future royalties to the Company by Teleplan for certain out-of-warranty repair services. In addition, the Company will reimburse Teleplan for specified product warranty related services. As a result of this agreement, the Company reduced its workforce by approximately 50 employees effective in June 2003. As of June 28, 2003, the Company identified and notified all impacted employees related to this reduction in force, and recorded costs of approximately $165,000.

In November 2002, the Emerging Issues Task Force (EITF) issued EITF Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 addresses how to determine whether a revenue arrangement involving multiple deliverables contains more than one unit of accounting for the purposes of revenue recognition and how the revenue arrangement consideration should be measured and allocated to the separate units of accounting. EITF Issue No. 00-21 applies to all revenue arrangements that the Company enters into after June 28, 2003. The adoption of this statement is not currently anticipated to have a material impact on the Company's financial condition or results of operations.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities." FIN 46 provides guidance on how to identify a variable interest entity (VIE) and determine when the assets, liabilities, and results of operations of a VIE need to be included in a company's consolidated financial statements. FIN 46 also requires additional disclosures by primary beneficiaries and other significant variable interest holders in a VIE. The provisions of FIN 46 are effective immediately for all VIEs created after January 31, 2003. For VIEs created before February 1, 2003, the provisions of FIN 46 must be adopted at the beginning of the first interim or annual reporting period beginning after June 15, 2003. While the Company is currently evaluating the potential impact of the adoption of FIN 46, the Company believes that it will not be subject to the consolidation or disclosure requirements of FIN 46.

In May 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 provides for certain changes in the accounting treatment of derivative contracts. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except for certain provisions that relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, which should continue to be applied in accordance with their respective effective dates. The requirements of SFAS No. 149 should be applied prospectively. Management anticipates that the adoption of SFAS No. 149 will not have a material impact on the Company's consolidated financial statements.

Also in May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This new statement changes the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. It requires that those instruments be classified as liabilities in balance sheets. SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the Company's third quarter of 2003. The adoption of this statement did not have a material impact on the Company's consolidated financial statements

The following discussion contains forward-looking statements that involve future risks and uncertainties. We may achieve different results than those anticipated in these forward-looking statements. The actual results that we achieve may differ materially from any forward-looking statements due to such risks and uncertainties. Words such as 'believes,' 'anticipates,' 'expects,' 'intends,' 'plans' and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. You should take into account the risks described in our Annual Report on Form 10-K for the year ended December 28, 2002 and other factors described below when considering such forward-looking statements. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report.

We are a leading provider of information storage products, including tape drive products, automated tape libraries and recording media. Our strategic focus is data backup and archival applications for workstations, midrange computer systems and networks. Computer manufacturers and resellers require a variety of storage products, which vary in price, performance, capacity and form-factor characteristics as their needs for reliable data backup and archival storage increase. Our strategy is to offer a number of products to address a broad range of these requirements.

Our tape drive products are based on VXA® and MammothTape™ technologies and our tape library products are based upon VXA®, MammothTapeÔ , LTOÔ (UltriumÔ ) technologies.

We market our products worldwide to distributors, resellers and original equipment manufacturers ("OEMs"). We have also provided repair services directly to OEMs and to our distributors' and resellers' customers, and in the future our outsourcing partner, as discussed below, will provide such services.

Our distributor and reseller channel customers purchase products for resale and they may provide services to their customers, such as:

• distribution;
• financial terms and conditions;
• pre-sales, sales and/or post-sales system upgrades; or
• other value-added products and/or services.

Even though we have no obligation, we support some of these customers by providing marketing and technical support directly to them or their consumers. As a result, we may incur certain additional costs for these sales. Other costs and risks associated with our distributor or reseller customers may include:

• inventory price protections;
• stock rotation obligations;
• short term marketing promotions; and
• customer and consumer rebates.

OEM customers incorporate our products as part of their own systems, which they then sell to their customers under their own brand name. We work closely with our OEM customers during early product development stages to help ensure our products will readily integrate into the OEM's systems.

The sales cycle for an OEM typically covers many months. During this time, the OEM may:

• evaluate the technology;
• qualify the product specifications;
• verify our compliance with product specifications;
• integrate the product into its system; and
• publicly announce the integration. This step typically occurs toward the end of the sales cycle before volume shipments of our products are made to the OEM.

Due to our continued liquidity constraints, our product suppliers significantly reduced their product shipments to us during the first four months of 2003. As a result, we were unable to fully meet our customer orders during the first quarter. Product shipments resumed on a current basis in May 2003. As of August 18, 2003, we were filling all backlog orders on a current basis, and we are receiving product shipments on an as-needed-basis from all significant suppliers.

In May 2003, one of our major customers filed bankruptcy. As of March 29, 2003, we had totally reserved the amount of $5,962,000 on our accounts receivable with this customer.

During the first quarter of 2003, we recorded additional inventory reserves of $6,849,000 for excess and obsolete inventory due to changes in sales forecasts and planned discontinuance of older tape drive and automation products.

In July 2003, we entered into an agreement to outsource our repair and service functions to an outside third party, Teleplan Service Logistics, Inc. as described in Note 7 to the consolidated financial statements.

As of August 18, 2003, we are attempting to renegotiate the terms of notes payable previously entered into with four of our largest suppliers. See further discussion under "Liquidity and Capital Resources" and Note 5 to the consolidated financial statements.

In July, 2003, the Company entered into an agreement with two additional shareholders to guarantee an additional $250,000 of borrowings from Silicon Valley Bank in exchange for up to 5,000,000 common shares to be issued in July, October and December 2003.

The Company is in default under two lease agreements for facilities and is a defendant in litigation regarding one lease, as described in Note 7 to the consolidated financial statements. 

The following table sets forth our operating results as a percentage of sales for each period presented.

The following tables present our revenue by product in absolute dollars and as a percentage of sales for each period presented.

As a percentage of net sales:

Our net sales decreased by 36.2% from $35,649,000 in the second quarter of 2002 to $22,736,000 in the second quarter of 2003. Our sales decreased by 37.3% from $72,254,000 in the first six months of 2002 to $45,330,000 in the first six months of 2003. Both decreases are principally due to the continued downturn in business spending, the bankruptcy of a significant customer, and our inability to fulfill sales orders. Our inability to fulfill sales orders was due to reduced shipments from a supplier, primarily in the first four months of 2003, as a result of our continued liquidity constraints. As percentages of total net sales, sales of drives and media were comparable to those in 2002. For 2003, sales of VXA®-1 and VXA®-2 drives continued to replace declining sales of M2Ô drives. We began shipping VXA®-2 drives to the OEM channel in May 2003. Total revenue dollars from service, spares and other remained relatively constant from the second quarter of 2002 to the second quarter of 2003, but was a higher percentage of total net sales in 2003 due to decreased drive and library sales in 2003. Total service revenue, and related costs, may decrease significantly in the future as a result of the outsourcing of this function to TelePlan in July 2003.

As a percentage of total net sales, sales of libraries decreased from 25.5% in the second quarter of 2002 to 14.3% in the second quarter of 2003. For the first six months of