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Courseware Exhibits for Seagate Technology Buyout

Case No. N-201-063

16-Apr-01

Copyright c 2001 by the President and Fellows of Harvard College. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meams -electronic, mechanical, photocopying, recording, or optherwise -- without the premission of Harvard Business School.

or by any meams -Harvard Business School.

Exhibit 2. Summary Financial Data on Veritas Software


Veritas Software
Dec-96
Dec-97
Dec-98
Balance Sheet ($ Million)
Cash and Equivalents
Net Receivables
Inventories
Net Property, Plant, and Equipment
TOTAL ASSETS
Accounts Payable
Short-term Debt
Long-term Debt
Shareholders Equity

$67.6
16
NA
7
94.5
1.8
0.1
0.5
75

$151.3
$278.2
30.3
52.7
NA
NA
10.1
26.5
241.9
349.1
1.6
5
0
0
100
100
104.2
169.9

Stock Market Information


Total Book Debt (3/10/00) $ Millions
451
Equity Betaa
1.81
Stock Price (3/10/00)$/Share
168.69
Shares Outstanding (3/10/00) Millions
393.6
Source: Compustat and SEC Filings.
a
Equity beta estimated using daily returns over the six-month period from 9/1/99 to 3/1/00.

Exhibit 5. Worldwide Hard Disk Drive Industry Historical Performance and Projections, 1991-2003E

Total Sales (000s of units)


Y/Y % Change

1991

1992

1993

1994

1995

1996

1997

33.1

38.4
16.0%

51.8
34.9%

69
33.2%

90
30.4%

106.8
18.7%

129.3
21.0%

$26,200
7.8%

$21,730
-17.1%

$22,966
5.7%

$22,991
0.1%

$27,596
20.0%

$27,340
-0.9%

Total Revenues (millions of $) $24,300


Y/Y % Change

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

1998

1999 2000E

2001E

2002E

2003E

143.6
11.1%

165.9
15.5%

187.8
13.2%

212.5
13.1%

238.1
12.1%

268.2
12.6%

$25,483
-6.8%

$25,273
-0.8%

$26,640
5.4%

$28,409
6.6%

$30,450
7.2%

$32,699
7.4%

9) by Salomon Smith Barney.

Exhibit 6. Historical Operating Performance and Capitalization Ratios for Seagate Technology and U.S. Disk Drive Ind
1981

1982

1983

1984

1985

1986

1987

9.79

40.45
313.2%

110.41
173.0%

343.9
211.5%

214.65
-37.6%

459.84
114.2%

958.07
108.3%

EBITDA
% Sales

0.87
8.9%

10.7
26.5%

18.82
17.0%

63.51
18.5%

0.07
0.0%

58.34
12.7%

208.24
21.7%

EBIT
% Sales

0.65
6.6%

9.89
24.4%

16.16
14.6%

55.72
16.2%

-12.01
-5.6%

39.18
8.5%

180.63
18.9%

9.47
0.22
2.45

43.47
0.81
5.04

157.25
2.65
38.83

214.72
7.8
42.66

275.23
12.08
31.22

305.08
19.17
38.68

814.12
27.6
78.4

19%

10.12
7.56

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

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

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

13%
9%
11%
7%
0.04
-6.84

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

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

8.9%
5.4%
19%
7%
9%
0%
3.31
2.19

6.2%
3.2%
9%
4%
-5%
-2%
3.46
1.42

7.3%
3.4%
5%
1%
-12%
-6%
4.12
2.34

0.7%
-3.5%
12%
5%
-6%
-2%
-1.58
-3.37

-4.4%
-10.3%
19%
7%
-5%
-3%
-3.19
-7.57

8.6%
5.3%
13%
5%
-7%
-4%
6.2
2.25

7.8%
4.5%
16%
7%
-11%
-4%
6.37
1.94

Seagate
Sales
% Growth

Assets
Depreciation & Amortization
CAPX
Debt/Book Assets
Debt/Mkt. Assets
(Debt-Cash)/Book Assets
(Debt-Cash)/Market Assets
EBITDA Interest Coverage
EBIT Interest Coverage

NA
18%
NA

Disk Drive Industry Medians


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

Source: Casewriters estimates based on data compiled from Compustat.

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


1988

1989

1990

1991

1992

1993

1994

1995

1996

1,265.97
32.1%

1,371.57
8.3%

2,413.18
75.9%

2,676.98
10.9%

2,875.27
7.4%

3,043.60
5.9%

3,500.10
15.0%

4,539.57
29.7%

8,588.35
89.2%

150.77
11.9%

90.97
6.6%

297.24
12.3%

255.57
9.5%

309.04
10.7%

439.05
14.4%

449.17
12.8%

629.85
13.9%

1,004.53
11.7%

100.4
7.9%

12.96
0.9%

179.32
7.4%

117.31
4.4%

139.91
4.9%

284.03
9.3%

310.96
8.9%

442.98
9.8%

627.38
7.3%

1,093.95
50.37
284.41

1,076.77
78.02
78.09

1,851.46
117.91
102.38

1,880.06
138.26
90.87

1,816.60
169.13
90.66

2,031.19
155.02
173.57

2,877.53
138.21
197.68

3,361.26
186.86
353.43

5,239.64
377.15
906.94

28%
20%
20%
14%
6.88
4.58

29%
24%
11%
9%
3.77
0.54

31%
28%
17%
15%
6.1
3.68

23%
27%
9%
11%
6.01
2.76

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

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

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

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

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

6.2%
2.3%
12%
8%
0%
-3%
8.15
4.58

7.3%
5.3%
13%
8%
-5%
-2%
5.74
2.71

9.6%
5.9%
10%
9%
-7%
-4%
6.03
3.3

8.6%
4.3%
13%
8%
2%
-1%
4.06
1.55

8.9%
5.9%
16%
16%
-1%
-3%
9
4.31

3.9%
-0.3%
19%
13%
-9%
-3%
4.38
-0.05

2.5%
-2.4%
12%
7%
-4%
-2%
5.58
0.37

4.7%
1.9%
10%
3%
-8%
-3%
3.59
1.84

7.0%
3.9%
13%
4%
-6%
-5%
7.06
5.04

1997

1998

1999

8,940.02
4.1%

6,819.00
-23.7%

6,802.00
-0.2%

1,521.03
17.0%

451
6.6%

1011
14.9%

1,019.83
11.4%

-138
-2.0%

398
5.9%

6,722.88
501.20
890.46

5,645.00
589.00
709.00

7,072.00
613.00
603.00

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

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

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

9.3%
7.5%
6%
1%
-21%
-8%
13
8.52

5.6%
-1.4%
14%
7%
-9%
-5%
4.2
-2.04

6.1%
1.1%
9%
4%
-23%
-5%
-0.09
-2.91

Exhibit 7. Summary Financial Data on Publicly Traded Hard Disk Drive Manufacturers
Seagate Technology
Jun-97
Jun-98
Jun-99

Quantum HDDa
Mar-97
Mar-98

Mar-99

$8,940
6,918
2,022
1,521
501
1,020
35
658
890

$6,819
5,830
989
451
589
-138
51
-530
709

$6,802
5,250
1,552
1,011
613
398
48
1,176
603

$4,591
4,093
498
146
109
37
20
41
164

$4,615
4,242
373
-6
68
-74
11
-53
119

$3,599
3,308
291
-61
71
-133
9
-153
82

$2,284
1,041
808
1,787
6,723
863
1
702
3,476
2,717

$1,827
799
508
1,669
5,645
577
1
704
2,937
2,241

$1,623
872
451
1,687
7,072
714
1
703
3,563
1,773

NA
NA
NA
NA
NA
NA
NA
NA
NA

$325
586
212
228
1,646
401
0
109
906

$524
392
148
199
1,470
342
0
115
791

NA

739

709

Income Statement ($ Million)


Sales
Cost of Goods Sold
Gross Margin
EBITDA
Depreciation + Amortization
Operating Profit
Interest Expense
Net Income
Capital Expenditures
Balance Sheet ($ Million)
Cash and Equivalents
Net Receivables
Inventories
Net Property, Plant, and Equipment
TOTAL ASSETS
Accounts Payable
Short-term Debt
Long-term Debt
Shareholders Equity
Net Working Capitalb
Capital Market Information ($ Million)

Year-end Market Equity Capitalization


$5,861
$5,844
$8,620
NA
NA
NA
Equity Betasc
1.2
0.8
Total Book Debt (3/10/00)
704
110
Debt Rating
BBB
B2
Stock Price (3/10/00)$/Share
64.25
8.875
Shares Outstanding (3/10/00) Millions
227.2
82.6
Source: Data compiled from Compustat and SEC Filings.
a
Quantum HDD was floated in August 1999 as a separately traded subsidiary of Quantum Corporation, containing just the hard
stock prices or market capitalization, prior to that date.
b
Net Working Capital = Total Current Assets Total Current Liabilities (excluding Short-Term Debt).
c
Equity betas estimated using daily returns over the six-month period from 9/1/99 to 3/1/00.

Western Digital
Jun-97
Jun-98
Jun-99

Maxtor
Dec-96
Dec-97

Dec-98

$4,178
3,464
714
365
63
302
0
268
156

$3,542
3,187
355
-41
107
-148
12
-290
199

$2,767
2,562
205
-188
131
-319
33
-493
107

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

$1,424
1,287
137
-32
66
-97
37
-110
82

$2,409
2,034
375
134
74
60
29
31
95

$208
546
224
248
1,307
418
0
0
620
364

$460
369
187
347
1,443
330
0
519
318
464

$226
273
144
238
1,022
336
10
534
-154
72

$31
89
81
92
315
110
204
229
-327
93

$33
248
155
99
555
207
245
224
-221
440

$258
318
153
108
863
428
5
145
169
170

$2,716

$1,043

$589
0.6
236
B2
5.1875
129.1

NA

NA

$1,320
1
114
B1
11.625
113.2

n, containing just the hard disk drive operations. As a result, there is no information on historical

Exhibit 8. Projected Operating Performance of Seagate Disk Drive Business


Year Ending June 30,
2000

2001

2002

2003

2004

2005

2006

Base Case ($ Million)


Revenues
Gross Margin

$6,619

$7,417

$8,564

$9,504

$10,416

$11,359

$12,350

1,264

1,409

1,696

2,043

2,312

2,624

3,026

EBITA

141

189

316

449

499

614

724

Depreciation

625

626

642

666

708

726

729

Capital Expenditures

627

690

720

795

700

725

750

Upside Case ($ Million)


Revenues
EBITA

$6,619
141

$8,185
365

$10,146
689

$11,283
783

$12,626
867

$13,961
1,000

$15,404
1,167

Downside Case ($ Million)


Revenues
EBITA

$6,619
141

$7,393
189

$7,797
322

$8,310
363

$8,801
378

$9,269
403

$9,759
407

Source: Casewriters estimates based on revenues and EBITA projections contained in SEC filings and casewriter estimates.
The downside case is identical to the buyer case contained in the SEC filings.

ings and casewriter estimates.