Edgar Filing: Seagate Technology plc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 30, 2012

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

For the transition period from: to

Commission File Number 001-31560

SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

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

38/39 Fitzwilliam Square

Dublin 2, Ireland

(Address of principal executive offices)

Telephone: (353) (1) 234-3136

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer: x		Accelerated filer: o

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

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

As of April 25, 2012, 425,234,957 shares of the registrant’s ordinary shares, par value $0.00001 per share, were issued and outstanding.

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INDEX

SEAGATE TECHNOLOGY PLC

		PAGE NO.

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets ¾ March 30, 2012 and July 1, 2011 (Unaudited)	3

	Condensed Consolidated Statements of Operations ¾ Three and Nine Months ended March 30, 2012 and April 1, 2011 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows ¾ Nine Months ended March 30, 2012 and April 1, 2011 (Unaudited)	5

	Condensed Consolidated Statement of Shareholders’ Equity ¾ Nine Months ended March 30, 2012 (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	35

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

	SIGNATURES	42

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

	March 30, 2012			July 1, 2011(a)
ASSETS
Current assets:
Cash and cash equivalents	$	1,638		$	2,677
Short-term investments	408			474
Restricted cash and investments	98			102
Accounts receivable, net	2,478			1,495
Inventories	841			872
Deferred income taxes	97			99
Other current assets	808			706
Total current assets	6,368			6,425
Property, equipment and leasehold improvements, net	2,179			2,245
Goodwill	464			31
Other intangible assets	541			1
Deferred income taxes	378			374
Other assets, net	134			149
Total Assets	$	10,064		$	9,225
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,172		$	2,063
Accrued employee compensation	262			199
Accrued warranty	221			189
Accrued expenses	499			452
Current portion of long-term debt	—			560
Total current liabilities	3,154			3,463
Long-term accrued warranty	154			159
Long-term accrued income taxes	80			67
Other non-current liabilities	140			121
Long-term debt, less current portion	2,862			2,952
Total Liabilities	6,390			6,762

Commitments and contingencies (See Notes 11 and 13)

Shareholders’ equity:
Ordinary shares and additional paid-in capital	4,804			3,980
Accumulated other comprehensive loss	(9		)	(6		)
Accumulated deficit	(1,121		)	(1,511		)
Total Shareholders’ Equity	3,674			2,463
Total Liabilities and Shareholders’ Equity	$	10,064		$	9,225

(a) The information in this column was derived from the Company’s audited Consolidated Balance Sheet as of July 1, 2011.

See Notes to Condensed Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	March 30, 2012			April 1, 2011			March 30, 2012			April 1, 2011

Revenue	$	4,450		$	2,695		$	10,457		$	8,112

Cost of revenue	2,809			2,179			7,257			6,517
Product development	270			224			737			646
Marketing and administrative	142			110			388			317
Amortization of intangibles	18			—			20			2
Restructuring and other, net	1			3			4			14
Total operating expenses	3,240			2,516			8,406			7,496

Income from operations	1,210			179			2,051			616

Interest income	2			2			5			6
Interest expense	(59		)	(59		)	(185		)	(151		)
Other, net	6			—			(2		)	(21		)
Other expense, net	(51		)	(57		)	(182		)	(166		)

Income before income taxes	1,159			122			1,869			450
Provision for income taxes	13			29			20			58
Net income	$	1,146		$	93		$	1,849		$	392

Net income per share:
Basic	$	2.57		$	0.21		$	4.29		$	0.85
Diluted	2.48			0.21			4.16			0.83
Number of shares used in per share calculations:
Basic	446			437			431			459
Diluted	463			453			445			475

Cash dividends declared per share	$	0.25		$	—		$	0.61		$	—

See Notes to Condensed Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	For the Nine Months Ended
	March 30, 2012			April 1, 2011
OPERATING ACTIVITIES
Net income	$	1,849		$	392
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	597			567
Share-based compensation	38			38
Loss on redemption of debt	17			26
Gain on sale of property and equipment	(18		)	(4		)
Gain on sale of strategic investments	(12		)	—
Deferred income taxes	(5		)	35
Other non-cash operating activities, net	7			(1		)

Changes in operating assets and liabilities:
Accounts receivable, net	(983		)	7
Inventories	167			(77		)
Accounts payable	191			181
Accrued employee compensation	63			(127		)
Accrued expenses, income taxes and warranty	(28		)	(10		)
Other assets and liabilities	(66		)	(80		)
Net cash provided by operating activities	1,817			947

INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold improvements	(497		)	(685		)
Proceeds from the sale of property and equipment	11			2
Purchases of short-term investments	(382		)	(208		)
Sales of short-term investments	330			118
Maturities of short-term investments	118			59
Cash used in acquisition of Samsung HDD assets and liabilities	(561		)	—
Change in restricted cash and investments	4			13
Other investing activities, net	12			(2		)
Net cash used in investing activities	(965		)	(703		)

FINANCING ACTIVITIES
Repayments of long-term debt and capital lease obligations	(670		)	(377		)
Net proceeds from issuance of long-term debt	—			736
Repurchases of ordinary shares	(1,172		)	(710		)
Proceeds from issuance of ordinary shares under employee stock plans	214			48
Dividends to shareholders	(266		)	—
Other financing activities, net	3			(3		)
Net cash used in financing activities	(1,891		)	(306		)

Decrease in cash and cash equivalents	(1,039		)	(62		)
Cash and cash equivalents at the beginning of the period	2,677			2,263
Cash and cash equivalents at the end of the period	$	1,638		$	2,201

See Notes to Condensed Consolidated Financial Statements.

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SEAGATE TECHNOLOGY PLC

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Nine Months Ended March 30, 2012

(In millions)

(Unaudited)

	Number of Ordinary Shares		Par Value of Shares		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total
Balance at July 1, 2011	425		$	—	$	3,980	$	(6	)	$	(1,511	)	$	2,463
Comprehensive income, net of tax:
Change in unrealized loss on cash flow hedges, net	—		—		—		(3		)	—			(3		)
Change in unrealized loss on marketable securities, net	—		—		—		1			—			1
Change in unrealized loss on post-retirement plan costs	—		—		—		(1		)	—			(1		)
Net income	—		—		—		—			1,849			1,849
Comprehensive income													1,846
Issuance of ordinary shares under employee stock plans	19		—		214		—			—			214
Issuance of ordinary shares, in connection with the acquisition of Samsung HDD assets and liabilities	45		—		569		—			—			569
Tax benefit from exercise of stock options	—		—		3		—			—			3
Repurchases of ordinary shares	(56	)	—		—		—			(1,196		)	(1,196		)
Dividends to shareholders	—		—		—		—			(263		)	(263		)
Share-based compensation	—		—		38		—			—			38
Balance at March 30, 2012	433		$	—	$	4,804	$	(9	)	$	(1,121	)	$	3,674

See Notes to Condensed Consolidated Financial Statements.

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1. Basis of Presentation and Summary of Significant Accounting Policies

Organization

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

Basis of Presentation and Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and all its wholly-owned subsidiaries, after elimination of intercompany transactions and balances. The preparation of financial statements in accordance with accounting principles generally accepted in the United States also requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its consolidated financial statements. The consolidated financial statements reflect, in the opinion of management, all material adjustments necessary to present fairly the consolidated financial position, results of operations, cash flows and shareholders’ equity for the periods presented. Such adjustments are of a normal and recurring nature. The Company’s Consolidated Financial Statements for the fiscal year ended July 1, 2011, are included in its Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (SEC) on August 17, 2011. The Company believes that the disclosures included in the unaudited Condensed Consolidated Financial Statements, when read in conjunction with its Consolidated Financial Statements as of July 1, 2011, and the notes thereto, are adequate to make the information presented not misleading.

The results of operations for the three and nine months ended March 30, 2012, are not necessarily indicative of the results of operations to be expected for any subsequent interim period in the Company’s fiscal year ending June 29, 2012. The Company operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The three and nine months ended March 30, 2012 and April 1, 2011 consisted of 13 weeks and 39 weeks, respectively. Fiscal year 2012 will be comprised of 52 weeks and will end on June 29, 2012.

Summary of Significant Accounting Policies

Since the Company’s fiscal year ended July 1, 2011, there have been no significant changes in the Company’s significant accounting policies other than the policy for testing impairment of goodwill discussed below. Please refer to Note 1 of “Financial Statements and Supplementary Data” contained in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2011, as filed with the SEC on August 17, 2011, for a discussion of the Company’s other significant accounting policies.

Impairment of Goodwill and Other Long-lived Assets — In September 2011, the FASB issued ASU No. 2011-08, Intangibles — Goodwill and Other (ASC Topic 350) — Testing Goodwill for Impairment. The ASU allows companies the option to perform a qualitative assessment in determining whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Based on the qualitative assessment, if it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company is not required to perform the two-step goodwill impairment test. The Company has early adopted the ASU in the first quarter of fiscal year 2012. As required by the new ASU, the Company tests goodwill of its reporting units for impairment whenever events occur or circumstances change, such as an adverse change in business climate or a decline in the overall industry, that would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill.

Recently Issued Accounting Pronouncements

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

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2. Balance Sheet Information

Investments

The Company’s short-term investments are primarily comprised of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. With the exception of securities held for its non-qualified deferred compensation plan, which are classified as trading securities, the Company classifies its investment portfolio as available-for-sale. The Company recognizes its available-for-sale investments at fair value with unrealized gains and losses included in Accumulated other comprehensive income (loss), which is a component of Shareholders’ equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in Interest income. Realized gains and losses are included in Other, net. The cost of securities sold is based on the specific identification method.

As of March 30, 2012, the Company’s Restricted cash and investments consisted of $78 million in cash equivalents and investments held in trust for payment of its non-qualified deferred compensation plan liabilities and $20 million in cash and investments held as collateral at banks for various performance obligations. As of July 1, 2011, the Company’s Restricted cash and investments consisted of $84 million in cash equivalents and investments held in trust for payment of its non-qualified deferred compensation plan liabilities and $18 million in cash and investments held as collateral at banks for various performance obligations.

The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of March 30, 2012:

(Dollars in millions)	Amortized Cost		Unrealized Gain/(Loss)			Fair Value
Available-for-sale securities:
Money market funds	$	1,133	$	—		$	1,133
Commercial paper	363		—			363
Corporate bonds	207		—			207
U.S. treasuries and agency bonds	94		1			95
Auction rate securities	17		(2		)	15
Other debt securities	109		—			109
	1,923		(1		)	1,922
Trading securities	76		2			78
Total	$	1,999	$	1		$	2,000

Included in Cash and cash equivalents						$	1,479
Included in Short-term investments						408
Included in Restricted cash and investments						98
Included in Other assets, net						15
Total						$	2,000

The Company’s available-for-sale securities include investments in auction rate securities. Beginning in fiscal year 2008, the Company’s auction rate securities failed to settle at auction and have continued to fail through March 30, 2012. Since the Company continues to earn interest on its auction rate securities at the maximum contractual rate, there have been no payment defaults with respect to such securities, and they are all collateralized, the Company expects to recover the entire amortized cost basis of these auction rate securities. The Company does not intend to sell these securities and has concluded it is not more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. Given the uncertainty as to when the liquidity issues associated with these securities will improve, these securities are classified within Other assets, net in the Company’s Condensed Consolidated Balance Sheets.

As of March 30, 2012, with the exception of the Company’s auction rate securities, the Company had no available-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no available-for-sale securities were other-than-temporarily impaired as of March 30, 2012.

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The fair value and amortized cost of the Company’s investments classified as available-for-sale at March 30, 2012, by remaining contractual maturity were as follows:

(Dollars in millions)	Amortized Cost		Fair Value
Due in less than 1 year	$	1,565	$	1,565
Due in 1 to 5 years	341		342
Thereafter	17		15
Total	$	1,923	$	1,922

The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of July 1, 2011:

(Dollars in millions)	Amortized Cost		Unrealized Gain/(Loss)			Fair Value
Available-for-sale securities:
Commercial paper	$	1,729	$	—		$	1,729
Money market funds	815		—			815
U.S. treasuries and agency bonds	190		—			190
Certificates of deposit	136		—			136
Corporate bonds	116		—			116
Auction rate securities	18		(2		)	16
Other debt securities	96		—			96
	3,100		(2		)	3,098
Trading securities	80		4			84
Total	$	3,180	$	2		$	3,182

Included in Cash and cash equivalents						$	2,590
Included in Short-term investments						474
Included in Restricted cash and investments						102
Included in Other assets, net						16
Total						$	3,182

As of July 1, 2011, with the exception of the Company’s auction rate securities, the Company had no available-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined no available-for-sale securities were other-than-temporarily impaired as of July 1, 2011.

Inventories

(Dollars in millions)	March 30, 2012		July 1, 2011
Raw materials and components	$	366	$	286
Work-in-process	273		201
Finished goods	202		385
	$	841	$	872

Other Current Assets

(Dollars in millions)	March 30, 2012		July 1, 2011
Vendor non-trade receivables	$	647	$	519
Other	161		187
	$	808	$	706

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

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Property, Equipment and Leasehold Improvements, net

(Dollars in millions)	March 30, 2012			July 1, 2011
Property, equipment and leasehold improvements	$	7,799		$	7,383
Accumulated depreciation and amortization	(5,620		)	(5,138		)
	$	2,179		$	2,245

3. Debt

Short-Term Borrowings

On January 18, 2011, the Company and its subsidiary, Seagate HDD Cayman (“the Borrower”), entered into a credit agreement which provides for a $350 million senior secured revolving credit facility. Seagate Technology plc and certain of its material subsidiaries fully and unconditionally guarantee, on a senior secured basis, the revolving credit facility. The revolving credit facility matures in January 2015. The $350 million revolving credit facility is available for cash borrowings and for the issuance of letters of credit up to a sub-limit of $75 million. As of March 30, 2012, no borrowings have been drawn under the revolving credit facility, and $4 million had been utilized for letters of credit.

Long-Term Debt

$600 Million Aggregate Principal Amount of 6.375% Senior Notes due October 2011 (the “2011 Notes”). The 2011 Notes matured on October 1, 2011, and the Company repaid the entire outstanding principal amount of $559 million, plus accrued and unpaid interest on October 3, 2011.

$430 Million Aggregate Principal Amount of 10.00% Senior Secured Second-Priority Notes due May 2014 (the “2014 Notes”). The interest on the 2014 Notes is payable semi-annually on May 1 and November 1 of each year. The issuer under the 2014 Notes is Seagate Technology International, and the obligations under the 2014 Notes are unconditionally guaranteed by the Company and certain of its significant subsidiaries. In addition, the obligations under the 2014 Notes are secured by a second-priority lien on substantially all of the Company’s tangible and intangible assets. The indenture governing the 2014 Notes contains covenants that limit the Company’s ability, and the ability of certain of its subsidiaries, (subject to certain exceptions) to incur additional debt or issue certain preferred shares, create liens, enter into mergers, pay dividends, redeem or repurchase debt or shares, and enter into certain transactions with the Company’s shareholders or affiliates. During the first nine months of fiscal year 2012, the Company repurchased $96 million aggregate principal amount of its 2014 Notes for cash at a premium to their principal amount, plus accrued and unpaid interest. The Company recorded a loss on the redemptions of approximately $12 million and $17 million for the three and nine months ended March 30, 2012, respectively, which is included in Other, net in the Company’s Condensed Consolidated Statements of Operations.

$600 Million Aggregate Principal Amount of 6.8% Senior Notes due October 2016 (the “2016 Notes”). The interest on the 2016 Notes is payable semi-annually on April 1 and October 1 of each year. The issuer under the 2016 Notes is Seagate Technology HDD Cayman, and the obligations under the 2016 Notes are unconditionally guaranteed by certain of the Company’s significant subsidiaries.

$750 Million Aggregate Principal Amount of 7.75% Senior Notes due December 2018 (the “2018 Notes”). The interest on the 2018 Notes is payable semi-annually on June 15 and December 15 of each year. The issuer under the 2018 Notes is Seagate Technology HDD Cayman and the obligations under the 2018 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by certain of the Company’s significant subsidiaries.

$600 Million Aggregate Principal Amount of 6.875% Senior Notes due May 2020 (the “2020 Notes”). The interest on the 2020 Notes is payable semi-annually on May 1 and November 1 of each year. The issuer under the 2020 Notes is Seagate Technology HDD Cayman, and the obligations under the 2020 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

$600 Million Aggregate Principal Amount of 7.00% Senior Notes due November 2021 (the “2021 Notes”). The interest on the 2021 Notes is payable semi-annually on January 1 and July 1 of each year. The issuer under the 2018 Notes is Seagate Technology HDD Cayman and the obligations under the 2021 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by certain of the Company’s significant subsidiaries.

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At March 30, 2012, future principal payments on long-term debt were as follows (in millions):

Fiscal Year
2012	$	—
2013	—
2014	319
2015	—
2016	—
Thereafter	2,550
	$	2,869

4. Income Taxes

The Company recorded an income tax provision of $13 million and $20 million for the three and nine months ended March 30, 2012, respectively. The income tax provision recorded for the nine months ended March 30, 2012 included approximately $10 million of discrete tax benefits from the reversal of a portion of the U.S. valuation allowance recorded in prior periods and the release of income tax reserves associated with the expiration of certain statutes of limitation.

The Company’s income tax provision recorded for the three and nine months ended March 30, 2012 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related to non-U.S. earnings generated in jurisdictions that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland, (ii) a decrease in valuation allowance for certain U.S. deferred tax assets, and (iii) the release of tax reserves associated with the expiration of certain statutes of limitation.

The Company recorded an income tax provision of $29 million and $58 million for the three and nine months ended April 1, 2011, respectively. The income tax provision for the three and nine months ended April 1, 2011 included approximately $15 million and $4 million, respectively, of net discrete charges, primarily related to increases in income tax reserves recorded for non-U.S. income tax positions taken in prior fiscal years partially offset by the release of income tax reserves associated with settlements of income tax audits and the expiration of certain statutes of limitations. In addition, the nine month period ended April 1, 2011 included an $11 million discrete income tax benefit from the loss recognized in the three months ended October 1, 2010 on the redemption of debt which was offset by a corresponding increase in the valuation allowance for U.S. deferred tax assets.

The Company’s provision for income taxes recorded for the three and nine months ended April 1, 2011 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes primarily due to the net effect of (i) tax benefits related to non-U.S. earnings generated in jurisdiction that are subject to tax holidays or tax incentive programs and are considered indefinitely reinvested outside of Ireland, (ii) income tax expense related to intercompany transactions, (iii) an increase in valuation allowance for U.S. deferred tax assets, and (iv) income tax reserves related to non-U.S. tax positions taken in prior fiscal years and the release of income tax reserves from settlements of income tax audits and the expiration of certain statutes of limitations.

5. Acquisitions

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

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

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

Inventories	$	141
Equipment	76
Intangible assets	580
Other assets	28
Total identifiable assets acquired	825
Warranty liability	(72		)
Other liabilities	(46		)
Total liabilities assumed	(118		)
Net identifiable assets acquired	707
Goodwill	433
Net assets acquired	$	1,140

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

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

Existing technology	$	137	2.0 years
Customer relationships	399		5.8 years
Total amortizable intangible assets acquired	536		4.8 years
In-process research and development	44
Total acquired identifiable intangible assets	$	580

During the three months ended March 31, 2012, the Company recorded adjustments to the preliminary fair value of certain assets acquired and liabilities assumed with the Samsung HDD business that resulted in a net decrease of $4 million to Goodwill. These adjustments included a $7 million increase in Other assets for spare parts and a $3 million increase to Equipment, offset by a $3 million increase in Warranty liability and a $3 million increase in Other liabilities related to certain assumed vendor obligations. These adjustments were based on information obtained in the current quarter about facts and circumstances that existed at the acquisition date.

The amount noted above for warranty is provisional, being an estimate calculated on the basis of projected product failure rates and timing of product returns during the warranty period. Seagate assumed product warranty obligations from Samsung on products sold prior to the acquisition. These products are warranted for up to three years from the original shipment date. The estimate of the warranty liability is subject to a significant degree of subjectivity since the Company has limited experience with Samsung products. If actual return rates differ materially from the Company’s estimate, or if there is an epidemic failure of drives for which Seagate assumed warranty obligations, the fair value of the warranty liability may need to be reestimated during the measurement period, which may be up to one year following the acquisition date.

The Company received a patent portfolio that may have value apart from being an enabling technology that is included within the fair value of Intangible assets — Existing technology. However, the Company has not received all information regarding these patents that is necessary for the completion of a review to determine the extent of encumbrances and the scope of their application. Therefore, provisionally, no separately identifiable value has been recognized for the patent portfolio.

As part of the acquisition, the Company assumed certain vendor-related and other obligations and contingent liabilities. Due to the nature of these obligations and contingent liabilities, except for the adjustment noted above relating to certain assumed vendor liabilities, the Company has not received sufficient information needed to determine the fair value of these obligations.

The $433 million of goodwill recognized is attributable primarily to the benefits the Company expects to derive from enhanced scale and efficiency to better serve its markets and expanded customer presence in China and Southeast Asia. Except for approximately $4 million of goodwill relating to assembled workforce in Korea, none of the goodwill is expected to be deductible for income tax purposes.

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The Company incurred $2 million and $31 million of expenses related to the acquisition of Samsung for the three and nine months ended March 30, 2012, which are included within Marketing and administrative expense on the Condensed Consolidated Statement of Operations.

The amounts of revenue and earnings of the acquired assets of Samsung’s HDD business included in the Company’s Condensed Consolidated Statement of Operations from the acquisition date during the three and nine months ended March 30, 2012, were as follows:

(Dollars in millions)	For the Three Months Ended		For the Nine Months Ended
Revenue	$	448	$	484
Net income	66		61

The unaudited pro forma financial results presented below for the three and nine months ended March 30, 2012 and April 1, 2011, include the effects of pro forma adjustments as if the acquisition date occurred as of the beginning of the prior fiscal year on July 3, 2010. The pro forma results combine the historical results of the Company for the three and nine months ended March 30, 2012 and April 1, 2011, respectively, and the historical results of the acquired assets and liabilities of Samsung’s HDD business, and include the effects of certain fair value adjustments and the elimination of certain activities excluded from the transaction. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the earliest period presented, nor is it intended to be a projection of future results.

	For the Three Months Ended				For the Nine Months Ended
(Dollars in millions)	March 30, 2012		April 1, 2011		March 30, 2012		April 1, 2011
Revenue	$	4,450	$	3,392	$	11,631	$	10,351
Net income	1,146		38		1,748		308

The pro forma results for the three and nine months ended March 30, 2012, include adjustments of $0 and $65 million, respectively, to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on July 3, 2010. The pro forma results for the three and nine months ended April 1, 2011, include adjustments of $29 and $85 million, respectively, to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on July 3, 2010.

6. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended March 30, 2012, are as follows:

(Dollars in millions)
Balance as of July 1, 2011	$	31
Goodwill acquired (1)	433
Balance as of March 30, 2012	$	464

(1) During the three months ended March 30, 2012, the Company recorded adjustments that resulted in a net decrease in goodwill acquired of $4 million. For further information on these adjustments, see “Note 5. Acquisitions.”

The carrying value of other intangible assets subject to amortization as of March 30, 2012, is set forth in the following table:

(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Useful Life

Existing technology	$	137	$	(19	)	$	118	1.7 years
Customer relationships	399		(20		)	379		5.5 years
Total amortizable other intangible assets	$	536	$	(39	)	$	497	4.6 years

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The carrying value of other intangible assets subject to amortization as of July 1, 2011 is set forth in the following table:

(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Useful Life
Customer relationships	$	3	$	(2	)	$	1	0.5 year

The carrying value of In-process research and development was $44 million and $0 as of March 30, 2012 and July 1, 2011, respectively.

For the three and nine months ended March 30, 2012, amortization expense of other intangible assets was $35 million and $40 million, respectively. For the three and nine months ended April 1, 2011, amortization expense of other intangible assets was $1 million and $6 million, respectively. As of March 30, 2012, expected amortization expense for other intangible assets for each of the next five years and thereafter is as follows:

(Dollars in millions)

Remainder of 2012	$	35
2013	139
2014	102
2015	70
2016	64
Thereafter	87
	$	497

7. Derivative Financial Instruments

The Company is exposed to foreign currency exchange rate, interest rate, and to a lesser extent, equity price risks relating to its ongoing business operations. The Company enters into foreign currency forward exchange contracts to manage the foreign currency exchange rate risk on forecasted expenses denominated in foreign currencies and to mitigate the remeasurement risk of certain foreign currency denominated liabilities. The Company’s accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company records all derivatives in the Condensed Consolidated Balance Sheets at fair value. The changes in the fair values of the effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive loss until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted to fair value through earnings. As of March 30, 2012 and July 1, 2011, the Company had a net unrealized loss of $1 million and a net unrealized gain of $2 million, respectively, on cash flow hedges.

The Company dedesignates its cash flow hedges when the forecasted hedged transactions are realized or it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in Accumulated other comprehensive loss are reclassified immediately into earnings and any subsequent changes in the fair value of such derivative instruments are immediately reflected in earnings. The Company did not recognize any material net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during the three and nine months ended March 30, 2012 and April 1, 2011. As of March 30, 2012, the Company’s existing foreign currency forward exchange contracts mature within 12 months. The deferred amount currently recorded in Accumulated other comprehensive loss and expected to be recognized into earnings over the next 12 months is a net loss of $1 million.

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The following tables show the total notional value of the Company’s outstanding foreign currency forward exchange contracts as of March 30, 2012 and July 1, 2011:

	As of March 30, 2012
(Dollars in millions)	Contracts Designated as Hedges		Contracts Not Designated as Hedges
Thai baht	$	—	$	123
Singapore dollars	50		10
Chinese renminbi	14		—
Czech koruna	—		15
	$	64	$	148

	As of July 1, 2011
(Dollars in millions)	Contracts Designated as Hedges		Contracts Not Designated as Hedges
Thai baht	$	98	$	235
Singapore dollars	212		9
Chinese renminbi	78		—
Czech koruna	—		11
	$	388	$	255

The following table shows the Company’s derivative instruments measured at fair value as reflected in the Condensed Consolidated Balance Sheet as of March 30, 2012:

Fair Values of Derivative Instruments as of March 30, 2012

	Asset Derivatives			Liability Derivatives
(Dollars in millions)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	Other current assets	$	—	Accrued expenses	$	(1	)
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	Other current assets	—		Accrued expenses	(2		)
Total derivatives		$	—		$	(3	)

The following table shows the Company’s derivative instruments measured at fair value as reflected in the Condensed Consolidated Balance Sheet as of July 1, 2011:

Fair Values of Derivative Instruments as of July 1, 2011

	Asset Derivatives			Liability Derivatives
(Dollars in millions)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts	Other current assets	$	4	Accrued expenses	$	(2	)
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts	Other current assets	1		Accrued expenses	(4		)
Total derivatives		$	5		$	(6	)

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The following tables show the effect of the Company’s derivative instruments on Other comprehensive income (“OCI”) and the Condensed Consolidated Statement of Operations for the three and nine months ended March 30, 2012:

(Dollars in millions)

	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)					Location of Gain or (Loss) Reclassified from Accumulated OCI	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)					Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and	Amount of Gain or (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) (a)
Derivatives Designated as Cash Flow Hedges	For the Three Months		For the Nine Months			into Income (Effective Portion)	For the Three Months		For the Nine Months			Amount Excluded from Effectiveness Testing)	For the Three Months		For the Nine Months
Foreign currency forward exchange contracts	$	4	$	(7	)	Cost of revenue	$	—	$	(4	)	Cost of revenue	$	1	$	—

		Amount of
	Location of	Gain or (Loss)
	Gain or (Loss)	Recognized in Income
	Recognized in	on Derivative
	Income on	For the Three		For the Nine
Derivatives Not Designated as Hedging Instruments	Derivative	Months		Months
Foreign currency forward exchange contracts	Other, net	$	3	$	(1	)

(a) The amount of gain or (loss) recognized in income represents $0 related to the ineffective portion of the hedging relationship for the three and nine months ended March 30, 2012. The amounts excluded from the assessment of hedge effectiveness, for the three and nine months ended March 30, 2012, were a gain of $1 million and $0, respectively.

(Dollars in millions)

Amount of

Gain or (Loss)

Location of

Gain or (Loss)

Location of

Reclassified from

Gain or (Loss)

Recognized in Income

Recognized in OCI

Gain or (Loss)

Accumulated OCI

Recognized in Income

(Ineffective Portion and

on Derivative

Reclassified from

into Income

on Derivative

Amount Excluded from

(Effective Portion)

Accumulated OCI

(Effective Portion)

(Ineffective Portion and

Effectiveness Testing) (a)

Derivatives Designated as Cash Flow Hedges

For the Three
Months

For the Nine
Months

into Income
(Effective Portion)

For the Three
Months

For the Nine
Months

Amount Excluded from
Effectiveness Testing)

For the Three
Months

For the Nine
Months

Foreign currency forward exchange contracts

)

Cost of revenue

)

		Amount of
	Location of	Gain or (Loss)
	Gain or (Loss)	Recognized in Income
	Recognized in	on Derivative
	Income on	For the Three			For the Nine
Derivatives Not Designated as Hedging Instruments	Derivative	Months			Months
Foreign currency forward exchange contracts	Other, net	$	(1	)	$	19
Total return swap	Operating expenses	1			14
		$	—		$	33

(a) The amount of gain or (loss) recognized in income represents $0 related to the ineffective portion of the hedging relationship for both the three and nine months ended April 1, 2011. The amounts excluded from the assessment of hedge effectiveness, for the three and nine months ended April 1, 2011, were losses of $2 million and $1 million, respectively.

8. Fair Value

Measurement of Fair Value

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

A fair value hierarchy is based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflects the Company’s own assumptions of market participant valuation (unobservable inputs). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value:

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Level 1 — Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 — Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or

Level 3 — Prices or valuations that require inputs that are both unobservable and significant to the fair value measurement.

The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate the Company’s or the counterparty’s non-performance risk is considered in determining the fair values of liabilities and assets, respectively.

Items Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding accrued interest components, as of March 30, 2012:

	Fair Value Measurements at Reporting Date Using
(Dollars in millions)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Balance
Assets:
Commercial paper	$	—	$	363	$	—	$	363
Money market funds	1,115		—		—		1,115
U.S. treasuries and agency bonds	—		95		—		95
Corporate bonds	—		207		—		207
Other debt securities	—		107		—		107
Total cash equivalents and short-term investments	1,115		772		—		1,887

Restricted cash and investments:
Mutual funds	71		—		—		71
Other debt securities	25		2		—		27
Auction rate securities	—		—		15		15
Total assets	$	1,211	$	774	$	15	$	2,000

Liabilities:
Derivative liabilities	$	—	$	3	$	—	$	3
Total liabilities	$	—	$	3	$	—	$	3

	Fair Value Measurements at Reporting Date Using
(Dollars in millions)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Balance
Assets:
Cash and cash equivalents	$	1,115	$	364	$	—	$	1,479
Short-term investments	—		408		—		408
Restricted cash and investments	96		2		—		98
Other assets, net	—		—		15		15
Total assets	$	1,211	$	774	$	15	$	2,000

Liabilities:
Accrued expenses	$	—	$	3	$	—	$	3
Total liabilities	$	—	$	3	$	—	$	3

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The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding accrued interest components, as of July 1, 2011:

	Fair Value Measurements at Reporting Date Using
(Dollars in millions)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total Balance
Assets:
Commercial paper	$	—	$	1,729		$	—	$	1,729
Money market funds	800		—			—		800
U.S. treasuries and agency bonds	—		190			—		190
Certificates of deposit	—		133			—		133
Corporate bonds	—		116			—		116
Other debt securities	—		96			—		96
Total cash equivalents and short-term investments	800		2,264			—		3,064

Restricted cash and investments:
Mutual funds	81		—			—		81
Other debt securities	19		2			—		21
Auction rate securities	—		—			16		16
Derivative assets	—		5			—		5
Total assets	$	900	$	2,271		$	16	$	3,187

Liabilities:
Derivative liabilities	$	—	$	(6	)	$	—	$	(6	)
Total liabilities	$	—	$	(6	)	$	—	$	(6	)

	Fair Value Measurements at Reporting Date Using
(Dollars in millions)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total Balance
Assets:
Cash and cash equivalents	$	800	$	1,790		$	—	$	2,590
Short-term investments	—		474			—		474
Restricted cash and investments	100		2			—		102
Other current assets	—		5			—		5
Other assets, net	—		—			16		16
Total assets	$	900	$	2,271		$	16	$	3,187

Liabilities:
Accrued expenses	$	—	$	(6	)	$	—	$	(6	)
Total liabilities	$	—	$	(6	)	$	—	$	(6	)

Level 1 assets consist of money market funds and mutual funds for which quoted prices are available in an active market.

The Company classifies items in Level 2 if the financial asset or liability is valued using observable inputs. The Company uses observable inputs including quoted prices in active markets for similar assets or liabilities. Level 2 assets include: agency bonds, corporate bonds, commercial paper, municipal bonds, certificates of deposit, international government securities, asset backed securities, mortgage backed securities and U.S. Treasuries. These debt investments are priced using observable inputs and valuation models which vary by asset class. The Company uses a pricing service to assist in determining the fair values of all of its cash equivalents and short-term investments. For the cash equivalents and short-term investments in the Company’s portfolio, multiple pricing sources are generally available. The pricing service uses inputs from multiple industry standard data providers or other third party sources and various methodologies, such as weighting and models, to determine the appropriate price at the measurement date. The Company corroborates the prices obtained from the pricing service against other independent sources and, as of March 30, 2012, has not found it necessary to make any adjustments to the prices obtained. The Company’s derivative financial instruments are also classified within Level 2. The Company’s derivative financial instruments consist of foreign currency forward exchange contracts. The Company recognizes derivative financial instruments in its condensed consolidated financial statements at fair value. The Company determines the fair value of these instruments by considering the estimated amount it would pay or receive to terminate these agreements at the reporting date.

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The Company’s Level 3 assets consist of auction rate securities with a par value of approximately $17 million, all of which are collateralized by student loans guaranteed by the Federal Family Education Loan Program. Beginning in fiscal year 2008, these securities failed to settle at auction and have continued to fail through March 30, 2012. Since there is no active market for these securities, the Company valued them using a discounted cash flow model. The valuation model is based on the income approach and reflects both observable and significant unobservable inputs.

The table below presents a reconciliation of assets measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3) for the nine months ended March 30, 2012:

(Dollars in millions)	Auction Rate Securities
Balance at July 1, 2011	$	16
Total net gains (losses) (realized and unrealized):
Realized gains (losses)(1)	—
Unrealized gains (losses)(2)	—
Sales and Settlements	(1		)
Balance at March 30, 2012	$	15

(1) Realized gains (losses) on auction rate securities are recorded in Other, net in the Condensed Consolidated Statements of Operations.

(2) Unrealized gains (losses) on auction rate securities are recorded as a separate component of Other comprehensive income (loss) in Accumulated other comprehensive income (loss), which is a component of Shareholders’ equity.

Items Measured at Fair Value on a Non-Recurring Basis

	Fair Value Measurements Using
(Dollars in millions)	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Balance
Assets:
Equity investment	$	—	$	—	$	5	$	5

The Company enters into certain strategic investments for the promotion of business and strategic objectives. Strategic investments are included in Other assets, net in the Condensed Consolidated Balance Sheets, are recorded at cost and are periodically analyzed to determine whether or not there are indicators of impairment. The carrying value of the Company’s strategic investments at March 30, 2012 and July 1, 2011 totaled $21 million and $27 million, respectively. The Company sold certain strategic investments during the nine months ended March 30, 2012, and recorded a gain of $12 million in Other, net in the Condensed Consolidated Statements of Operations for the three and nine months ended March 30, 2012.

There were no impairment charges recognized for the three months ended March 30, 2012. During the first quarter of fiscal year 2012, the Company determined that an equity investment accounted for under the cost method was other-than-temporarily impaired, and recognized a charge of $7 million, in order to write down the carrying amount of the investment to its estimated fair value. The amount was recorded in Other, net in the Condensed Consolidated Statements of Operations. There were no impairment charges recognized for the three and nine months ended April 1, 2011. Since there was no active market for the equity securities of the investee, the Company estimated fair value of the investee by using the market approach, which was then used to estimate the Company’s applicable portion of the fair value of its underlying intellectual property assets at the end of the third quarter of fiscal 2012.

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Other Fair Value Disclosures

The Company’s debt is carried at amortized cost. The fair value of the Company’s debt is derived using the average of bid and ask prices from brokers on the date of valuation, which takes into account the yield curve, interest rates, and other observable inputs. Accordingly, these fair value measurements are categorized as Level 2. The following table presents the fair value and amortized cost of the Company’s debt and capital lease in order of maturity:

	March 30, 2012				July 1, 2011
(Dollars in millions)	Carrying Amount		Estimated Fair Value		Carrying Amount			Estimated Fair Value

Capital Lease	$	—	$	—	$	1		$	1
6.375% Senior Notes due October 2011	—		—		559			561
10.0% Senior Secured Second-Priority Notes due May 2014	313		363		403			481
6.8% Senior Notes due October 2016	599		660		599			647
7.75% Senior Notes due December 2018	750		825		750			780
6.875% Senior Notes due May 2020	600		639		600			591
7.00% Senior Notes due November 2021	600		651		600			598
	2,862		3,138		3,512			3,659
Less short-term borrowings and current portion of long-term debt	—		—		(560		)	(562		)
Long-term debt, less current portion	$	2,862	$	3,138	$	2,952		$	3,097

9. Shareholders’ Equity

Share Capital

The Company’s authorized share capital is $13,500 and consists of 1,250,000,000 ordinary shares, par value $0.00001, of which 433,259,918 shares were outstanding as of March 30, 2012, and 100,000,000 preferred shares, par value $0.00001, of which none were issued or outstanding as of March 30, 2012.

Ordinary shares—Holders of ordinary shares are entitled to receive dividends when and as declared by the Company’s board of directors (the “Board of Directors”). Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of preferred shares, any remaining assets of the Company will be distributed ratably to holders of the preferred and ordinary shares. Holders of shares are entitled to one vote per share on all matters upon which the ordinary shares are entitled to vote, including the election of directors.

Preferred shares—The Company may issue preferred shares in one or more series, up to the authorized amount, without shareholder approval. The Board of Directors is authorized to establish from time to time the number of shares to be included in each series, and to fix the rights, preferences and privileges of the shares of each wholly unissued series and any of its qualifications, limitations or restrictions. The Board of Directors can also increase or decrease the number of shares of a series, but not below the number of shares of that series then outstanding, without any further vote or action by the shareholders.

The Board of Directors may authorize the issuance of preferred shares with voting or conversion rights that could harm the voting power or other rights of the holders of the ordinary shares. The issuance of preferred shares, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of the Company and might harm the market price of its ordinary shares and the voting and other rights of the holders of ordinary shares.

Issuance of Ordinary Shares

During the nine months ended March 30, 2012, the Company issued approximately 19 million of its ordinary shares from the exercise of stock options, release of restricted units and performance shares, and approximately 45 million of its ordinary shares in connection with the Samsung HDD acquisition.

Repurchases of Equity Securities

On January 27, 2010, the Board of Directors authorized an Anti-Dilution Share Repurchase Program (the “January 2010 Anti-Dilution Share Repurchase Program”). The January 2010 Anti-Dilution Share Repurchase Program authorized the Company to repurchase its ordinary shares to offset increases in diluted shares, such as those caused by employee stock plans, used in the determination of diluted net income per share. The Board of Directors authorized the Company to terminate the January 2010 Anti-Dilution Share Repurchase Program, effective April 26, 2012.

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On November 29, 2010, the Board of Directors authorized the Company to repurchase an additional $2 billion of its outstanding ordinary shares (“the November 2010 Share Repurchase Program”).

On January 25, 2012, the Board of Directors authorized the Company to repurchase an additional $1 billion of its outstanding ordinary shares (“the January 2012 Share Repurchase Program”).

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

The following tables set forth information with respect to repurchase of the Company’s shares made during the current fiscal year for each of the Company’s repurchase programs:

January 2010 Anti-Dilution Share Repurchase Program

(In millions)	Number of Shares Repurchased	Dollar Value of Shares Repurchased
Cumulative repurchased through July 1, 2011	53	$	889
Cumulative repurchased through March 30, 2012	53	$	889

November 2010 Share Repurchase Program

(In millions)	Number of Shares Repurchased	Dollar Value of Shares Repurchased
Cumulative repurchased through July 1, 2011	36	$	517
Repurchased in fiscal year 2012	56	1,196
Cumulative repurchased through March 30, 2012	92	$	1,713

January 2012 Share Repurchase Program

(In millions)	Number of Shares Repurchased	Dollar Value of Shares Repurchased
Repurchased in fiscal year 2012	—	$	—
Cumulative repurchased through March 30, 2012	—	$	—

10. Compensation

The Company recorded approximately $12 million and $38 million of stock-based compensation during the three and nine months ended March 30, 2012, respectively. The Company recorded approximately $12 million and $38 million of stock-based compensation during the three and nine months ended April 1, 2011, respectively.

Seagate Technology plc 2004 Share Compensation Plan (the “SCP”). On November 4, 2011, the Company filed Post-Effective Amendment No. 1 to deregister 11,041,148 ordinary shares that remained available for grant as of October 27, 2011, under the SCP and no shares have been granted from the SCP subsequent to that date.

Seagate Technology plc 2012 Equity Incentive Plan (the “EIP”). On October 26, 2011, the shareholders approved the EIP and authorized the issuance of up to a total of 27,000,000 ordinary shares, par value $0.0001 per share, plus any shares remaining available for grant under the SCP as of the effective date of the EIP (which was equal to 11,041,148 ordinary shares as of the effective date of the EIP and which will increase by any shares in respect of awards previously granted under the SCP that expire, are cancelled or are forfeited) (together, the “Share Reserve”). Any shares that are subject to options or share appreciation rights granted under the EIP will be counted against the Share Reserve as one share for every one share granted, and any shares that are subject to restricted share bonus awards, restricted share units, performance share bonus awards or performance share units (collectively, “Full-Value Share Awards”) will generally be counted against the Share Reserve as two and one-tenth shares for every one share granted. As of March 30, 2012, there were approximately 36.9 million ordinary shares available for issuance under the EIP.

Shares that are subject to Full-Value Share Awards will generally vest over a period of three to four years. Options will generally vest as follows: 25% of the options will vest on the first anniversary of the vesting commencement date and the remaining 75% will vest ratably each month thereafter over the next 36 months. Options granted under the EIP have an exercise price equal to the closing price of the Company’s ordinary shares on date of grant.

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11. Guarantees

Indemnifications to Officers and Directors

On May 4, 2009, the Company entered into a new form of indemnification agreement (the “Revised Indemnification Agreement”) with its officers and directors of the Company and its subsidiaries (each, an “Indemnitee”). The Revised Indemnification Agreement provides indemnification in addition to any of Indemnitee’s indemnification rights under the Company’s Articles of Association, applicable law or otherwise, and indemnifies an Indemnitee for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts actually and reasonably incurred by him or her in any action or proceeding, including any action by or in the right of the Company or any of its subsidiaries, arising out of his or her service as a director, officer, employee or agent of the Company or any of its subsidiaries or of any other entity to which he or she provides services at the Company’s request. However, an Indemnitee shall not be indemnified under the Revised Indemnification Agreement for (i) any fraud or dishonesty in the performance of Indemnitee’s duty to the Company or the applicable subsidiary of the Company or (ii) Indemnitee’s conscious, intentional or willful failure to act honestly, lawfully and in good faith with a view to the best interests of the Company or the applicable subsidiary of the Company. In addition, the Revised Indemnification Agreement provides that the Company will advance expenses incurred by an Indemnitee in connection with enforcement of the Revised Indemnification Agreement or with the investigation, settlement or appeal of any action or proceeding against him or her as to which he or she could be indemnified. A subsidiary of the Company has also entered into a deed of indemnity on similar terms to the Revised Indemnification Agreement with certain of its officers and directors. The nature of the indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay on behalf of its officers and directors. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying condensed consolidated financial statements with respect to these indemnification obligations.

Intellectual Property Indemnification Obligations

The Company has entered into agreements with customers and suppliers that include limited intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party intellectual property claims arising from these transactions. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers and suppliers. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification obligations.

Product Warranty

The Company estimates probable product warranty costs at the time revenue is recognized. The Company generally warrants its products for a period of one to five years. The Company uses estimated repair or replacement costs and uses statistical modeling to estimate product return rates in order to determine its warranty obligation. In addition, estimated settlements for customer compensatory claims relating to product quality issues, if any, are accrued as warranty expense. Changes in the Company’s product warranty liability during the three and nine months ended March 30, 2012 and April 1, 2011, were as follows:

	For the Three Months Ended						For the Nine Months Ended
(Dollars in millions)	March 30, 2012			April 1, 2011			March 30, 2012			April 1, 2011

Balance, beginning of period	$	401		$	367		$	348		$	372
Warranties issued	41			54			126			151
Repairs and replacements	(87		)	(53		)	(212		)	(152		)
Changes in liability for pre-existing warranties, including expirations	17			(7		)	41			(10		)
Warranty liability assumed from Samsung HDD business	3			—			72			—
Balance, end of period	$	375		$	361		$	375		$	361

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12. Earnings Per Share

Basic earnings per share is computed by dividing income available to shareholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share is computed by dividing income available to shareholders by the weighted-average number of shares outstanding during the period and the number of additional shares that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options, shares to be purchased under the ESPP, and unvested restricted stock units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in fair market value of the Company’s share price can result in a greater dilutive effect from potentially dilutive securities. The following table sets forth the computation of basic and diluted net income per share:

For the Three Months Ended