UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission file number: 001-16447

Maxtor Corporation

(Exact name of registrant as specified in its charter)

500 McCarthy Blvd., Milpitas, California 95035

(Address of principal executive offices)

Registrant’s telephone number, including area code:

(408) 894-5000

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

Common Stock, par value $.01 per share

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

5.75% Convertible Subordinated Debentures, due March 1, 2012

      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 (the “Act”) 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 þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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.     o

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

      The aggregate market value of the registrant’s common stock, $.01 par value per share, held by non-affiliates of the registrant on June 25, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, was $1,674,675,782 (based on the closing sales price of the registrant’s common stock on that date). Shares of the registrant’s common stock held by each officer and director and each person who owns more than 5% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of March 4, 2005, 253,017,786 shares of the registrant’s common stock, $.01 par value per share, were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Proxy Statement for the 2005 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the end of the fiscal year ended December 25, 2004, are incorporated by reference in Part III hereof. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.

PART I

Overview

      Maxtor Corporation (“Maxtor” or “the Company”) is one of the world’s leading suppliers of hard disk drives for desktop, enterprise and consumer electronics applications.

      Our desktop products are marketed under the DiamondMax, MaXLine and Fireball brand names and consist of 3.5-inch disk drives with storage capacities that range from 40 to 300 gigabytes (“GB”). These drives are used primarily in desktop computers; however, there is an emerging market for these products in a variety of consumer electronic applications, including digital video recorders (“DVRs”), set-top boxes and game consoles, as well as personal storage applications. We also provide a line of high-capacity ATA/ Serial ATA drives for use in mid-line and near-line storage applications for the enterprise market. Our MaXLine-branded drives, with 250 or 300 GB of capacity, are designed specifically for high-reliability to meet the needs of enterprise customers who need ready access to fixed content data files. Finally, we offer a line of high-end 3.5-inch hard disk drives for use in high-performance, storage-intensive enterprise applications such as workstations, enterprise servers and storage subsystems. These Intel-based server products are marketed under the Atlas brand name and provide storage capacities of 18.4 to 300 GB at speeds of 10,000 rotations per minute (“RPM”) and 15,000 RPM.

      Maxtor, DiamondMax and Atlas are registered trademarks of Maxtor. MaXLine, Fireball, Maxtor Personal Storage, Maxtor OneTouch, and Maxtor QuickView are trademarks of Maxtor. All other brand names and trademarks appearing in this report are the property of their respective holders.

      We are incorporated in the State of Delaware. Our principal executive offices are located at 500 McCarthy Boulevard, Milpitas, California 95035. The telephone number is (408) 894-5000.

Company Background

      Maxtor was founded in 1982. We completed our initial public offering of common stock in 1986. In 1994, we sold 40% of our outstanding common stock to Hyundai Electronics Industries (now Hynix Semiconductor Inc.) and its affiliates. In early 1996, Hyundai Electronics America (now Hynix Semiconductor America Inc. — “Hynix”) acquired all of our remaining outstanding common stock. Following this acquisition by Hynix, in July 1998, we completed a public offering of our common stock, which was followed by a secondary offering of our stock in February 1999. On April 2, 2001, we acquired Quantum Corporation’s Hard Disk Drive Group (“Quantum HDD”). In October 2001, Hynix sold a majority of its shares of Maxtor common stock, and in February 2002, Hynix distributed its remaining shares of Maxtor common stock.

Industry Background

      Maxtor participates in the desktop computing, enterprise and consumer electronics markets.

      Desktop Computing Market. Desktop computing represents the largest market for hard disk drives for both Maxtor and the industry. According to International Data Corporation (“IDC”), drives shipped for use in desktop computing applications totaled approximately 209 million in 2004 compared with total drive shipments of 306 million. Approximately 76% of the drives that Maxtor shipped in 2004 were for the desktop computing market. Desktop computers are used in a wide variety of environments, including the home, business and multimedia entertainment. Demand for hard disk drives used in desktop computers has been driven by a variety of factors, including:

      According to IDC, hard drives shipped for desktop computing will increase approximately 9% from 2004 to approximately 228 million in 2005. IDC estimates that revenue from drives shipped to the desktop computing market will increase approximately 5.5% from $12.4 billion to $13.1 billion in 2005. Despite the increase in units, revenue growth will be moderated by the decline in desktop drive average selling prices (ASPs), a trend which has characterized the industry. The decrease in ASPs reflects the declining prices of desktop computers, the hard drive industry’s ability to reduce the average unit cost of its drives and competitive pressures. Success in this market requires excellent quality and reliability, technology and low-cost manufacturing.

      Enterprise Market. The enterprise market for hard disk drives includes manufacturers of workstations, servers, storage area networks and computer subsystems. This market has traditionally been served with hard disk drives that use either fiber channel or small computer system interface (“SCSI”). According to IDC, the market for enterprise drives totaled approximately 23 million in 2004 and is expected to increase 6.5% to approximately 25 million in 2005. IDC expects revenue for enterprise drives to increase approximately 4.7% from $4.1 billion in 2004 to approximately $4.3 billion in 2005.

      During 2004, we transitioned the manufacture of 10,000 RPM SCSI drives from a contract manufacturer to our own facilities in Singapore. In addition, we restructured our SCSI operation and reduced its headcount. As a result of these actions and the early success of our next-generation areal density SCSI products, we expect to have improved gross profit on our server products throughout 2005.

      During the past several years, a new enterprise market has emerged for mid-line and near-line storage which addresses applications that require ready access to large pools of fixed content data and where cost per gigabyte is a critical factor. Such applications include e-mail archiving, engineering drawings, medical imaging, scientific data and video. We were a pioneer in this market, offering our high capacity ATA/ Serial ATA MaXLine hard drives specifically designed with high reliability features. Driven by recent regulatory requirements for archiving and retrieving data and the growth of digital imaging, we believe this market offers excellent growth opportunities. We will focus on expanding our business through the introduction of higher capacity drives with unique feature sets and by increasing our customer base.

      Consumer Electronics Market. Demand for emerging consumer electronics devices that incorporate hard disk drives is growing. DVRs, set-top boxes and game consoles use 3.5-inch hard drives to enhance the entertainment experience. These devices have grown rapidly since their introduction in 1999 and represented approximately 16 million of hard drives sold in 2004, according to IDC. Maxtor was a leader in the DVR market, shipping a total of 6.3 million drives in 2004.

      Hard drives with smaller form factors (primarily 0.85-inch, 1.0-inch and 1.8-inch) are also incorporated into consumer electronics devices, specifically MP3 players, digital cameras and cell phones. IDC estimates that the unit volume for small form factor drives was approximately 16 million in 2004. Maxtor has a development effort underway on small form factor drives, but does not plan to participate in this market until 2006.

Our Strategy

      Maxtor is a major provider of hard disk drives to leading computer and consumer electronics manufacturers, distributors and retailers. Our financial performance suffered in 2004, reflecting an uncompetitive cost structure, high expenses and an inefficient product roadmap. We have a plan to return Maxtor to profitability and have begun its execution. The following elements are part of our strategy to improve our financial performance and maintain our leading presence in the market:

      Pursue Low-Cost Manufacturing. During 2004, we completed the transition of manufacturing of our 10,000 RPM SCSI drives from Matsushita-Kotobuki Electronics Industries, Ltd. (“MKE”) to our own

manufacturing facilities in Singapore. This has resulted in a lower cost structure for the SCSI business. We are moving forward aggressively on the transition of the manufacturing of entry-level desktop hard disk drives from Singapore to our manufacturing facility in Suzhou, China. Manufacturing in China offers the potential to significantly reduce costs through a lower salary structure, as well as reduced shipping and freight charges as we use suppliers with a local Chinese presence. Finally, we are pursuing additional activities to improve factory throughput and manufacturing efficiencies.

      Optimize Supply Chain and Improve Procurement Efficiencies. We have identified opportunities in our supply chain and procurement process that will improve our cost structure going forward. In 2004, we announced strategic partnerships with our two head vendors — SAE/ TDK and ALPS Electric Co. Ltd., which provide for an assured head supply at a competitive cost. Our strategic long term relationships with these two head suppliers provided us with early access to leading edge hard disk drive technologies and permit us to have efficiency in product design without significant capital expenditures. We work with these suppliers on an ongoing basis to provide us with competitive costs. In addition, we are examining a variety of options that will position us to further reduce the cost of our heads and all of our components over the long-term. MMC, our media division, provides approximately half of our media. During 2005, we are pursuing additional qualifications of MMC media that will increase production volume and improve factory utilization. Longer term, we are evaluating options that will lower MMC’s cost structure further. We are developing plans to relocate the majority of our media production to Asia starting in 2006. We continually work with all our component suppliers to optimize availability, price, quality and service. Finally, we are implementing new processes that will enable us to reduce freight, shipping and warranty costs.

      Refocus Operating Expenses. We believe that in order to remain competitive from a product offering and feature standpoint, we need most of the product development and advanced technology staff that we have today. However, we have identified up to 200 potential employee reductions in several additional areas in the United States, including quality, supplier engineering and sales, general and administration and will be eliminating these positions over the course of 2005. In addition, there will be a reduction in headcount of up to 5,500 employees at our Singapore manufacturing facility as we transition manufacturing of additional desktop products to China and we plan to close one of our two sites in Singapore in early 2006. Although we are focused on reducing operating expenses, we may hire additional personnel in key areas such as product development and advanced research to permit us to achieve our goals.

      Rationalize Product Roadmap. Our product roadmap had become inefficient and costly. We had two product platforms for desktop drives — a single head platform with a unique design optimized for low-cost manufacturing and a second platform for drives with two or more heads. In late 2004, we made the decision to stop all new development work on the single head platform. We will continue to support the current single head 40 GB drive through its end-of-life, but all future development work will be done solely on a cost-optimized two-head platform, where we will also produce future single head disk drives. This action will eliminate the costs associated with the unique tooling, manufacturing, infrastructure and capital that supported this platform. We delayed our entry into the 2.5-inch disk drive market for mobile computing by canceling the previously-announced 2.5-inch disk drive scheduled for release in the first half of 2005 as a result of our evaluation of the market for this product and our product offering. We are developing a common, scalable architecture for our products, and expect products with this architecture will launch by the end of 2006. We expect this common architecture will significantly improve our development efficiency and manufacturability of products. We have simplified our planned product introductions of desktop drives. Rationalizing the product roadmap will allow us to focus on quality, reliability and the predictability of delivery schedules and help enhance customer satisfaction. Some of the financial benefits of the new roadmap will be realized throughout 2005. Other savings will be not be apparent until 2006, when we have achieved a much greater degree of commonality and scalability across our entire product line.

      Pursue Opportunities in Growth Markets. We believe the demand for hard disk drives in consumer applications will continue to grow. Today, DVRs, set-top boxes and game consoles represent the primary market for hard disk drive volume in the consumer electronics market. We are supplying leading manufacturers with hard disk drives for a variety of their consumer electronic applications. We intend to leverage our leadership in this market by continuing to develop hard disk drive products tailored to these applications. Our

Maxtor QuickView drives are designed specifically for digital entertainment applications and include acoustics features, audio video streaming performance, thermal monitoring systems and error correction code. We will continue to introduce new hard disk drives with higher capacities and features targeted specifically to this market.

      In addition, the market for consumer electronics applications for small form factor devices, such as MP3 players, digital cameras and cell phones, appears very promising. As consumer understanding and acceptance of the benefits of hard drive functionality within these devices grow and as our products become available, we believe this market represents a significant opportunity for us.

      We also believe there is growth potential in the enterprise market for high capacity, high reliability ATA/ Serial ATA drives in mid-line and near-line storage applications, where data is generated in large volumes and retrieved occasionally. Specific applications include e-mail archiving, engineering drawings, medical imaging, scientific data and video images. In these environments, we believe high capacity, high reliability desktop drives provide the optimal cost per gigabyte metric that enterprise storage customers seek. We currently have relationships with some of the leading storage subsystem vendors, including EMC Corporation, Hewlett-Packard Company, LSI Logic Corporation, Network Appliance, Inc. and Storage Technology Corporation to provide hard disk drives for these applications and we intend to pursue additional customers and applications for this new category.

      Maintain Leading Presence With Core Computer Manufacturer, Distribution and Retail Customers. In 2005, we will be focusing on improving our execution, particularly with regard to quality, reliability and dependability of delivery schedules, for our desktop hard drives. Our timely introduction of the next-generation areal density SCSI enterprise hard drives has provided us with the opportunity to enhance our position with server manufacturers.

      We made progress during 2004 in expanding our presence in emerging geographies by strengthening our relationships with certain distributors and adding regional service centers in India and other fast-growing economies in Asia, Europe and Latin America. In 2005, we will leverage our in-country presence to further penetrate these markets by working with our distributors to offer additional services and support. We have an extensive retail network in the United States and Western Europe. During 2005, we will seek to increase our presence in select rapidly-growing areas of Asia.

      Strengthen Core Leadership Team. We appointed a new management team, including a new Chief Executive Officer, a new President and Chief Operating Officer and a new Chief Financial Officer, in late 2004. We are actively recruiting for additional senior executive positions to further strengthen the management of the Company. Specific positions to be filled are primarily in engineering and general management, as well as staff areas such as human resources.

Technology and Product Development

      Hard Disk Drive Technology. The basic design of a hard disk drive has not changed materially since its introduction in the 1950s. The main components of the hard disk drive are the head disk assembly and the printed circuit board. The head disk assembly includes the head, media (disks), head positioning mechanism (actuator) and spin motor. These components are contained in a base plate assembly. The printed circuit board includes custom integrated circuits, an interface connector to the host computer and a power connector.

      The head disk assembly consists of one or more disks positioned around a spindle hub that rotates the disks by a spin motor. Disks are made of a smooth substrate to which a thin coating of magnetic material is applied. Each disk has a head suspended directly above or below it, which can read data from or write data to the spinning disk. The actuator moves the head to precise positions on the disk.

      The integrated circuits on the printed circuit board typically include a drive interface and a controller. The drive interface receives instructions from the computer, while the controller directs the flow of data to or from the disks, and controls the heads. The location of data on each disk is logically maintained in tracks, divided into sectors. The computer sends instructions to read data or write data to the disks based on track and

sector locations. Industry standard interfaces are utilized to allow the disk drive to communicate with the computer.

      A key performance metric in the hard disk drive industry is “areal density,” which is the measure of stored bits per square inch on the recording surface of a disk. A higher areal density allows a hard disk drive provider to increase the storage capacity for a particular drive, or to reduce the number of heads and/or disks to achieve the same capacity. The rate of increase in areal density for the industry has slowed as current capacities are sufficient to meet most user requirements and the technology to achieve higher densities has become more complex. This slower rate of increase in areal density has meant longer product lives, and therefore, potentially further decreases in the price per drive in the later stages of product life, which could exacerbate the pressure to reduce the costs of components. This is a particular issue for us as we are not vertically integrated with regard to supply of heads. We will continue to pursue increases in areal density across our product lines to address the markets with high capacity requirements.

      Product Development. Our product development effort includes advanced technology and product design.

      We augment our traditional product development activities with an advanced technology group. The advanced technology group’s purpose is to invent new disk drive technologies and monitor and evaluate advancements for possible integration into our future products. This group also works closely with our product development teams and strategic component vendors to:

      This group also focuses on leveraging our current proven technology platform by re-using as much electronic and mechanical technology as possible in each successive product generation.

      Our product design group concentrates on achieving required product specifications and improving product performance, robustness, manufacturability, quality and materials costs. The product design group is also responsible, in part, for executing our new product introduction process. This process is highly disciplined and is designed to ensure that new product designs meet clearly specified criteria in terms of yield, scrap, quality, productivity and production ramp rates prior to release into volume production.

Products

      Our desktop products are marketed under the Fireball, DiamondMax, and MaXLine brand names and consist of 3.5-inch hard disk drives with storage capacities that range from 40 to 300 GB and speeds of 5,400 RPM and 7,200 RPM. Our desktop drives come in configurations ranging from 1 to 4 platters per drive, allowing us to address a wide range of applications for desktop computers, from entry level to mid-range to the high-end. In addition, there is an emerging market for these drives in a variety of consumer electronics applications, including DVRs, set-top boxes, and game consoles. All of these hard disk drives have a number of features including high speed interfaces for greater data throughput, a robust mechanical design for reliability, giant magneto-resistive head technology and a digital signal processor-based electronic architecture.

      Our high performance 3.5-inch hard disk drives are for use in storage-intensive applications such as workstations, enterprise servers and storage subsystems. These Intel-based server products are marketed under the Atlas brand name and provide storage capacities of 18.4 to 300 GB and speeds of 10,000 RPM and 15,000 RPM.

      We also offer a line of personal storage products designed for use in the home or office. Our OneTouch external storage drives provide a simple, powerful solution for storage and backup of important digital data,

including MP3 music files, digital photographs, video images and business data. Our QuickView Expander is designed to augment the storage of television shows and movies for DVR owners.

      The table below sets forth the key performance characteristics of our hard disk drive products.

Manufacturing

      To be competitive, we must manufacture high-quality, high-performance hard disk drives with industry leading time-to-volume production at competitive costs, and we must be able to respond quickly to changes in product delivery schedules. Our hard disk drive manufacturing operations consist primarily of the final assembly of high-level subassemblies, built to our specifications, and the testing of completed products.

      We manufacture our disk drives in two locations — Singapore and Suzhou, China, with our Singapore operation conducted in two facilities. We completed construction of our new manufacturing facility in Suzhou, China in 2004 and began the manufacturing of entry-level desktop drives. We are qualified for production in China by most major OEMs and additional qualifications are expected in 2005. Also during 2004 we completed the transition of the manufacturing of our 10,000 RPM server drives from MKE, our previous contract manufacturer, to our own facilities in Singapore. With this transition, manufacturing of all our drives is performed by Maxtor.

      Our manufacturing facilities utilize a cell-based process, enabling us to dedicate manufacturing cells to a particular product model. We combine our cell-based approach with a sophisticated factory information system that collects data on various product and quality metrics. The cell-based approach provides us with the flexibility to readily scale our production in response to customer needs.

      Our cell-based process enables us to:

      Our plan is to bring down the manufacturing lines of high volume, single-platter desktop drives from Singapore, one at a time, and move them to China. By early 2006, Suzhou will become the primary site for the manufacture of our one and two-headed single-platter hard disk drives. When completed, the transition will enable us to close down one of our buildings in Singapore.

      We also manufacture media used in our products through our division, MMC Technology Inc. (“MMC”), at its facilities in San Jose and Fremont, California. During 2005, we intend to grow volume at MMC through additional qualifications in order to increase its factory utilization and improve profitability. In addition, we are developing plans to relocate the majority of our media production to Asia starting in 2006.

Materials and Supply Chain

      We have developed and continue to develop strategic relationships with leading suppliers of many of the key components for our hard disk drive products. These relationships enable us to actively manage our supply chain to improve our ability to choose state-of-the-art components and to reduce component inventory and overall product costs. In addition, our strategic suppliers work closely with our advanced technology group, enabling us to gain early access to leading edge hard disk drive technology and to improve the overall efficiency of our product design process.

      We rely on a limited number of suppliers to provide Maxtor specific components for our products. These components include heads, media, custom electronics, motors and mechanical parts. Maxtor will typically qualify two or three sources for these key components for each product in order to meet supply assurance requirements. During 2004, we announced strategic partnerships with our two head suppliers, SAE/ TDK and ALPS Electric. MMC, our internal source of media supply, provided approximately 50% of our media needs in 2004. We have selected a single source for some of our components, however, in these cases, we have qualified dual manufacturing facilities to ensure availability of supply and flexibility.

Customers and Sales Channels

      We sell our products directly to leading manufacturers of desktop computer and server systems and consumer electronics devices, through key distributors and through the retail channel. Leading OEM customers include Dell Computer Corporation, Hewlett-Packard Company, Samex Inc., Sanmina and Solectron Corporation. Leading distributors include Almasa Computer LLC, Bell Microproducts Inc., Esys Integrated Pty. Ltd., Formoza Electronics GMBH and Ingram Micro Inc. Retail chain stores that feature our products include Best Buy, CompUSA, Fry’s Electronics, Office Depot and Staples.

      Manufacturers. Revenue from our five largest OEM customers, represented 25.6%, 25.1% and 23.0% in 2004, 2003, and 2002, respectively. None of our customers accounted for 10% or greater of our sales in 2004. Dell represented 11.0% of our sales in fiscal 2003 and 11.5% in fiscal 2002. No other customer represented over 10% of our sales during such periods. We believe that our success depends on our ability to maintain and further develop strong customer relationships with desktop, storage and server computer system and consumer electronics manufacturers and to provide products that fit their specific needs.

      Distributors. We use a select group of distributors to sell our products cost-effectively to the large number of geographically dispersed customers, which tend to hold small market shares of the overall desktop and server computer markets. These distributors service value-added resellers, dealers, system integrators and small desktop and server manufacturers. Distributors accounted for 39.4%, 41.8% and 47.2% of our revenue in 2004, 2003 and 2002, respectively. Distributors generally enter into non-exclusive agreements with us for the purchase and redistribution of product. Purchase orders are placed and revised on a weekly basis. We grant certain of our distributors price protection and limited rights to return product on a rotation basis.

      Retailers. To expand awareness of the Maxtor brand, we sell our retail-packaged products, including hard disk drives and external storage devices, into the retail channel. We sell directly to major retailers such as computer superstores, warehouse clubs and computer electronics stores, and authorized sales through distributors to smaller retailers. Retailers accounted for 8.6%, 7.7% and 4.9% of our revenue in 2004, 2003 and 2002, respectively. We believe the retail channel complements other sales channels. Retailers supply the after-market “upgrade” sector in which end users purchase and install hard disk drive products to upgrade their computers. Retail distribution is also an important channel for the sale of our external storage products which appeal to the end user interested in emerging consumer applications that have extensive storage requirements, such as digital photography, MP3 music downloads, video-editing and data backup. We grant certain of our retailers price protection and limited rights to return product on a rotation basis.

      We conduct our operations internationally, with sales to both domestic as well as foreign customers. For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 17 of the Notes to Consolidated Financial Statements.

Sales and Marketing

      We market and sell our products to leading personal computer, Intel-based server, storage subsystem and consumer electronics manufacturers, distributors and retailers. Our representative offices are located throughout the United States and in Australia, People’s Republic of China, France, Germany, Great Britain, Hong Kong, Japan, Republic of Korea, Russia, Singapore, Switzerland, Taiwan and United Arab Emirates. We have formed multi-disciplined, dedicated account and channel teams focused on each current and targeted strategic personal computer, Intel-based server, storage subsystem and consumer electronics OEM, as well as regional distributor and retail accounts. These teams generally are comprised of representatives from our sales, marketing, engineering and quality organizations. Our senior management also takes an active role in our sales efforts. Dedicated field sales and technical support personnel are located in close proximity to the manufacturing facilities of each of our desktop computer manufacturer customers.

      Our marketing and public relations functions are performed both internally and through outside firms. Public relations, direct marketing, worldwide packaging and marketing materials are focused and targeted to various end-user markets. We utilize both consumer media and trade publications. We have programs under which qualifying resellers are reimbursed for certain advertising expenditures. We also have invested in direct marketing and customer satisfaction programs. We maintain ongoing contact with end users through primary and secondary market research, focus groups, product registrations and technical support databases.

Backlog

      We generally sell standard products according to standard agreements or purchase order terms. Delivery dates are specified by purchase orders. Such orders may be subject to change, cancellation or rescheduling by the customer without significant penalties. The quantity actually purchased and shipment schedules are frequently revised to reflect changes in the customer’s needs. In addition, orders for our products are filled for several large customers from just-in-time inventory warehouses, and orders are not placed ahead of time on our order entry backlog system. Instead, we receive a periodic forecast of requirements from the customer. Upon shipment from the just-in-time warehouse, the customer is invoiced. In light of these factors, backlog reporting as of any particular date may not be indicative of our actual revenue for any succeeding period and, therefore, is not necessarily an accurate predictor of our future revenue.

Competition

      We compete primarily with manufacturers of 3.5-inch hard disk drives for desktop and Intel-based server computers and consumer electronics applications. Our competitors in the hard disk drive market include Fujitsu, Hitachi Global Storage, Samsung, Seagate Technology, and Western Digital. In 2004, according to IDC, we were the third largest provider of hard disk drives worldwide based on units shipped.

      We believe that the most important competitive factors in the hard disk drive market are breadth of product lines, introduction of competitive products as measured by storage capacity, performance, quality, price, time-to-market introduction, time-to-volume production, customer qualifications, reliability and technical service and support.

      The desktop computer market segment and the overall hard disk drive market are intensely competitive even during periods when demand is stable. Many of our competitors historically have had a number of significant advantages, including larger market shares, a broader array of product lines, preferred vendor status with customers, extensive name recognition and marketing power, and significantly greater financial, technical and manufacturing resources. Some of our competitors make many of their own components, which may provide them with benefits including lower costs. In addition, our competitors may also engage in business practices that could reduce the demand for our products. These practices could include lowering prices to gain market share, bundling products with other products to increase demand, or developing new technologies which would significantly reduce the cost of their products.

      Increasing competition could reduce the demand for our products and/or the prices of our products by introducing technologically more advanced or less expensive products, which could reduce our revenues. In addition, new competitors could emerge and rapidly capture market share. If we fail to compete successfully against current or future competitors, our business, financial condition and operating results will suffer.

Intellectual Property

      The Company indemnifies certain customers, distributors, suppliers, and subcontractors for attorney fees and damages and costs awarded against these parties in certain circumstances in which its products are alleged to infringe third party intellectual property rights, including patents, registered trademarks, or copyrights. The terms of its indemnification obligations are generally perpetual from the effective date of the agreement. In certain cases, there are limits on and exceptions to its potential liability for indemnification relating to intellectual property.

      We have been granted, as of January 31, 2005, 815 U.S. and 166 foreign patents related to hard disk drive products and technologies, and have additional patent applications pending in the United States and certain foreign countries. We have patent protection on certain aspects of our technology and also rely on trade secret, copyright and trademark laws, as well as contractual provisions to protect our proprietary rights. There can be no assurance that our protective measures will be adequate to protect our proprietary rights; that others, including competitors with substantially greater resources, have not developed or will not independently develop or otherwise acquire equivalent or superior technology; or that we will not be required to obtain licenses requiring us to pay royalties to the extent that our products may use the intellectual property of others, including, without limitation, our products that may also be subject to patents owned or licensed by others. There can be no assurance that any patents will be issued pursuant to our current or future patent applications, or that patents issued pursuant to such applications or any patents we own or have license to use will not be invalidated, circumvented or challenged. In the case of products offered in rapidly emerging markets, such as consumer electronics, our competitors may file patents more rapidly or in greater numbers, resulting in the issuance of patents that may result in unexpected infringement assertions against us. Moreover, there can be no assurance that the rights granted under any such patents will provide competitive advantages to us or be adequate to safeguard and maintain our proprietary rights.

      Litigation may be necessary to enforce patents issued or licensed to us, to protect trade secrets or know-how owned by us or to determine the enforceability, scope and validity of our proprietary rights or those of others. We could incur substantial costs in seeking enforcement of our issued or licensed patents against

infringement or the unauthorized use of our trade secrets and proprietary know-how by others or in defending ourselves against claims of infringement by others, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the laws of certain countries in which our products are manufactured and sold, including various countries in Asia, may not protect our products and intellectual property rights to the same extent as the laws of the United States, and there can be no assurance that such laws will be enforced in an effective manner. Any failure by us to enforce and protect our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. We are subject to existing claims relating to our intellectual property which are costly to defend and may harm our business. For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Factors Affecting Future Performance.”

Employees

      As of December 25, 2004, we had 13,656 employees worldwide, including 1,392 in engineering, research and development; 324 in marketing, sales and customer technical support; 11,178 in manufacturing; 431 in operational support; and 331 in executive, general management and administration. As of December 25, 2004, we had 8,547 employees at our manufacturing facilities in Singapore, 1,600 employees at our manufacturing facilities in California, 1,314 employees at our manufacturing facilities in China and 171 employees at our foreign sales offices. None of our U.S. employees are currently represented by a labor organization. In May 1997, our Singapore subsidiary recognized a labor union, the United Workers of Electronics and Electrical Industries (“UWEEI”), and in November 1998, signed a three-year collective bargaining agreement with that union. Thereafter, in September 2001, our Singapore subsidiary concluded negotiations with the UWEEI and entered into a three year collective bargaining agreement. Another three year collective bargaining agreement was negotiated and concluded in December 2004 between UWEEI and our Singapore subsidiary. We believe that our employee relations are positive.

Executive Officers

      The following table lists the names, ages, positions and offices held by, and a brief account of the business experience of, each executive officer of the Company as of March 4, 2005. There are no family relationships between any director or executive officer of the Company. Executive officers serve at the discretion of the Board of Directors.

      Dr. C.S. Park has been our Chief Executive Office since November 2004. Dr. Park has been Chairman of our Board of Directors since May 1998 and has served as a member of our Board of Directors since February 1994. Dr. Park served as Investment Partner and Senior Advisor at H & Q Asia Pacific, a private equity firm, from April 2004 until September 2004, and as a Managing Director for the firm from November 2002 to March 2004. Dr. Park served as President and Chief Executive Officer of Hynix Semiconductor, Inc. from March 2000 to May 2002, and from June 2000 to May 2002 he also served as its Chairman. Dr. Park served as Chairman of Hynix Semiconductor America Inc. from September 1996 to July 2002, and from September 1996 to March 2000 he also served as its President and Chief Executive Officer. From September 1996 to May 1998, Dr. Park served as Vice Chairman of our Board of Directors. Dr. Park served as our President and Chief Executive Officer from February 1995 until July 1996. From 1993 until his appointment as our

President and Chief Executive Officer in 1995, he was Chairman, President and Chief Executive Officer of Axil Computer, Inc., a workstation computer manufacturer.

      Michael J. Wingert has been our President and Chief Operating Officer since November 2004. Mr. Wingert previously served at Cornice, Inc. as Chief Operating Officer since June 2004, as President and Chief Executive Officer since July 2004. Mr. Wingert served as our Executive Vice President/ General Manager, Server Products Group from November 2001 to June 2004. From November 1999 until November 2001, Mr. Wingert served as our Vice President, Desktop Engineering and became Senior Vice President, Engineering in April 2001. Before his promotion to Vice President, Desktop Engineering, he was our Vice President, Engineering for five years. Prior to joining us in 1994, Mr. Wingert held various senior management positions in product test and development at IBM.

      Duston M. Williams has been our Executive Vice President, Finance and Chief Financial Officer since December 2004. Mr. Williams previously served as Chief Financial Officer of Aruba Wireless Networks, a network infrastructure company, from 2003 to 2004, Chief Financial Officer of Rhapsody Networks, a storage networking provider (acquired by Brocade Communications Systems in 2003), from 2001 to 2003 and Chief Financial Officer of Netigy Corporation, a networking consulting company (acquired by ThruPoint Inc. in 2001), from 2000 to 2001. From 1986 to 1999, Mr. Williams served in a variety of accounting and finance positions at Western Digital Corporation, a maker of hard disk drives, including its Senior Vice President and Chief Financial Officer from 1996.

      Fariba Danesh has been our Executive Vice President, Operations since September 2004. Ms. Danesh served as Senior Vice President and Chief Operating Officer of Finisar Corporation, a provider of fiber optic subsystems and components and network test and monitoring systems which enable high-speed data communications, from April 2003 to September 2004. Ms. Danesh served as President and Chief Executive Officer of Genoa Corporation from June 2002 to April 2003, when Genoa was acquired by Finisar. From June 2000 to June 2002, she served as Genoa’s Senior Vice President, Operations. Prior to joining Genoa, Ms. Danesh was employed by Sanmina Corporation as Vice President, Manufacturing, from September 1999 to June 2000.

      Kurt Richarz has been our Senior Vice President, Worldwide Sales since February 2005. Mr. Richarz joined Maxtor in July 2002 as Vice President of Global Accounts. He became our Vice President of Worldwide Sales in April 2004. From 1990 until 2001, Mr. Richarz worked for Quantum Corporation in various capacities, most recently as Vice President of Sales from 1996 to 2001.

      John Viera has been our Senior Vice President Human Resources since July 2004. Prior to joining in 2003, Mr. Viera was senior vice president of human resources for Aspect Communications from February 1998 to September 2003. Previously he had been vice president of human resources for Octel Communications from 1989 to 1996, director of employee relations and organization development for KLA-Tencor from 1997 to 1998, and has held various human resources management positions for Impell Corporation, Xerox Corporation, Avantek and Ford Motor Company from 1970 to 1989. In addition, from 1996 to 1997, he has been a Senior Consultant for the Stayer Consulting Group, specializing in executive development and organization development.

      David L. Beaver has been our Senior Vice President, Worldwide Materials and Chief Procurement Officer since November 2001. From May 1998 until November 2001, Mr. Beaver served as our Vice President, Worldwide Materials and became Senior Vice President, Worldwide Materials in April 2001. From March 1997 to May 1998, Mr. Beaver was Vice President of Far East Materials and Logistics in our Singapore factory. From 1994 to 1997, he was Director of Operations and Materials at EMASS, an E-systems data storage company. From 1991 to 1994, he was Director of Corporate Materials Procurement at SyQuest, a storage company. He has over 20 years high tech data storage business management experience.

Available Information

      Our website address is http://www.maxtor.com. We file reports with the Securities and Exchange Commission (“SEC”), which we make available on our website free of charge. These reports include annual

reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, each of which is provided on our website as soon as reasonably practicable after we electronically file such materials with or furnish them to the SEC. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

      Our corporate headquarters, sales, marketing and advanced technology operations are located in a 776,000 square foot facility we lease in Milpitas, California. Of the 776,000 square feet, 427,000 support our ongoing operations and 349,000 remain vacant. We lease a 221,000 square foot facility in San Jose, California and a 183,000 square foot facility in Fremont, California, which we use for research and manufacturing of disk drive media.

      We also lease 477,000 square feet of engineering and pilot production operations as well as administrative, marketing and materials facilities in Longmont, Colorado. Of the Longmont facilities leases 27,000 square feet will terminate in March 2006 and 450,000 will terminate in March 2016 and is renewable for five years.

      We own and occupy 672,000 square feet in Shrewsbury, Massachusetts housing design and customer engineering, as well as advanced technology. Maxtor owns the Shrewsbury facility and 203,849 square feet of that facility is currently subleased. We also own and sublease a 180,000 square foot facility in Louisville, Colorado. All of our other domestic facilities are leased.

      Operations outside of the United States primarily consist of two manufacturing plants in Singapore that produce subassemblies and final assemblies for the Company’s hard disk drive products. The manufacturing facilities are located in two owned multi-story buildings in Singapore totaling approximately 802,000 square feet, which are located on two parcels of leased land totaling approximately 560,000 square feet, with leases terminating in 2016 and 2018, both with an option to renew for 30 years. In the second half of 2004 we brought online a manufacturing facility in the Suzhou Industrial Park in Suzhou, China. The building is owned and is approximately 800,000 square feet located on a parcel of leased land with a term of 49 years.

      We also lease various sales and support facilities in Australia, the People’s Republic of China, France, Germany, Hong Kong, Ireland, Japan, the Republic of Korea, Russia, Scotland, Singapore, Switzerland, Taiwan, United Arab Emirates and the United States.

      The aggregate rent under all of our worldwide leases is currently $31.8 million per annum. There can be no assurance that we will be able to obtain additional space to accommodate our future needs or dispose of excess space as required on reasonable terms.

      Prior to our acquisition of the Quantum HDD business, we, on the one hand, and Quantum and MKE, on the other hand, were sued by Papst Licensing, GmbH, a German corporation, for infringement of a number of patents that relate to hard disk drives. Papst’s complaint against Quantum and MKE was filed on July 30, 1998, and Papst’s complaint against Maxtor was filed on March 18, 1999. Both lawsuits, filed in the United States District Court for the Northern District of California, were transferred by the Judicial Panel on Multidistrict Litigation to the United States District Court for the Eastern District of Louisiana for coordinated pre-trial proceedings with other pending litigations involving the Papst patents (the “MDL Proceeding”). The matters will be transferred back to the District Court for the Northern District of California for trial. Papst’s infringement allegations are based on spindle motors that Maxtor and Quantum purchased from third party motor vendors, including MKE, and the use of such spindle motors in hard disk drives. We purchased the overwhelming majority of the spindle motors used in our hard disk drives from vendors that were licensed under the Papst patents. Quantum purchased many spindle motors used in its hard

disk drives from vendors that were not licensed under the Papst patents, including MKE. As a result of our acquisition of the Quantum HDD business, we assumed Quantum’s potential liabilities to Papst arising from the patent infringement allegations Papst asserted against Quantum. We filed a motion to substitute Maxtor for Quantum in this litigation. The motion was denied by the Court presiding over the MDL Proceeding, without prejudice to being filed again in the future.

      In February 2002, Papst and MKE entered into an agreement to settle Papst’s pending patent infringement claims against MKE. That agreement includes a license of certain Papst patents to MKE, which might provide Quantum, and thus us, with additional defenses to Papst’s patent infringement claims.

      On April 15, 2002, the Judicial Panel on Multidistrict Litigation ordered a separation of claims and remand to the District of Columbia of certain claims between Papst and another party involved in the MDL Proceeding. By order entered June 4, 2002, the court stayed the MDL Proceeding pending resolution by the District of Columbia court of the remanded claims. These separated claims relating to the other party are currently proceeding in the District Court for the District of Columbia.

      The results of any litigation are inherently uncertain and Papst may assert other infringement claims relating to current patents, pending patent applications, and/or future patent applications or issued patents. Additionally, we cannot assure you we will be able to successfully defend ourselves against this or any other Papst lawsuit. Because the Papst complaints assert claims to an unspecified dollar amount of damages, and because we were at an early stage of discovery when the litigation was stayed, we are unable to determine the possible loss, if any, that we may incur as a result of an adverse judgment or a negotiated settlement. A favorable outcome for Papst in these lawsuits could result in the issuance of an injunction against us and our products and/or the payment of monetary damages equal to a reasonable royalty. In the case of a finding of a willful infringement, we also could be required to pay treble damages and Papst’s attorney’s fees. The litigation could result in significant diversion of time by our technical personnel, as well as substantial expenditures for future legal fees. Accordingly, although we cannot currently estimate whether there will be a loss, or the size of any loss, a litigation outcome favorable to Papst could have a material adverse effect on our business, financial condition and operating results. Management believes that it has valid defenses to the claims of Papst and is defending this matter vigorously.

      No matters were submitted to a vote of our security holders during the fourth quarter of our fiscal year ended December 25, 2004.

PART II

      Our common stock is traded on the New York Stock Exchange under the symbol “MXO.” The table below sets forth the range of quarterly high and low sales prices for our common stock as reported by the New York Stock Exchange. Our fiscal year end is the last Saturday of December, conforming to a 52/53-week year methodology.

      As of March 4, 2005, there were 1,313 stockholders of record of our common stock including The Depository Trust Company, which holds shares of Maxtor common stock on behalf of an indeterminate number of beneficial owners.

Dividend Policy

      We have never paid cash dividends on our stock and do not anticipate paying cash dividends in the foreseeable future.

      The following table presents the consolidated financial information for the periods indicated: