Seagate 2004 Annual Report Download - page 97

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
warranty from one year to five years on all internal desktop and notebook disc drives shipped through the distribution and retail channels. The
Company uses estimated repair or replacement costs and uses statistical modeling to estimate product return rates in order to determine its
warranty obligation. Changes in the Company’s product warranty liability during the fiscal years ended July 1, 2005 and July 2, 2004 were as
follows:
The Company offers extended warranties on certain of its products. Deferred revenue in relation to extended warranties has not been
material to date.
12. Related Party Transactions
Fiscal Year
Ended
July 1,
2005
Fiscal Year
Ended
July 2,
2004
(in millions)
Balance, beginning of period
$
125
$
134
Warranties issued
147
69
Repairs and replacements
(113
)
(143
)
Changes in liability for pre
-
existing warranties, including expirations
84
65
Balance, end of period
$
243
$
125
Affiliate Transactions
Historically, the Company has provided substantial services to other affiliated companies. Upon the closing of the stock purchase
agreement by New SAC, these services continued to be provided by the Company through New SAC. The services provided generally include
general management, treasury, tax, financial reporting, benefits administration, insurance, information technology, legal, accounts payable and
receivable and credit functions, among others. The Company charged for these services through corporate expense allocations. The amount of
corporate expense allocations depended upon the total amount of allocable costs incurred by the Company on behalf of the affiliated company
less amounts charged as specified cost or expense rather than by allocation. Such costs have been proportionately allocated to the affiliated
companies based on detailed inquiries and estimates of time incurred by the Company’s corporate marketing and general administrative
departmental managers. Management believes that the allocations charged to other affiliated companies were reasonable. Allocations charged
to other affiliated companies’ marketing and administrative expenses for fiscal year 2005 were not material. Allocations charged to other
affiliated companies’ marketing and administrative expenses for fiscal years 2004 and 2003 were approximately $2 million and $4 million,
respectively. Xiotech Corporation and Certance were affiliates of Seagate Technology. The Company recorded revenue from Xiotech of $7
million in fiscal year 2005 and recorded revenue from Certance of $2 million for the period from July 3, 2004 through January 2005, at which
time it was sold to a third party. The Company recorded revenue from Xiotech and Certance of $8 million and $3 million in fiscal year 2004
and $23 million and $5 million in fiscal year 2003, respectively. There were no amounts receivable from affiliated companies at July 1, 2005.
The amounts receivable from Xiotech and Certance were $1 million from each at July 2, 2004. Purchases and sales to other affiliated
companies were not material for any of the periods presented.
Certain members of our board of directors are also on the boards of directors of Microsoft Corporation, Flextronics International Ltd. and
United Parcel Service, Inc. The Company sells disc drives to Microsoft, certain subcontractors to Microsoft and Flextronics for use in their
products. The Company recorded net revenue of $181 million, $150 million and $146 million in fiscal years 2005, 2004 and 2003, respectively,
for sales to Microsoft
93