Seagate 2006 Annual Report Download - page 103

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Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Indemnifications to Officers and Directors
The Company has entered into indemnification agreements, a form of which is incorporated by reference in the
exhibits of this report, with the members of our board of directors to indemnify them to the extent permitted by law
against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by the directors as a
result of any lawsuit, or any judicial, administrative or investigative proceeding in which the directors are sued as a
result of their service as members of our board of directors.
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 product quality issues, if any, are accrued
as warranty expense. Changes in the Company’s product warranty liability during the fiscal years ended June 29,
2007 and June 30, 2006 were as follows:
The Company offers extended warranties on certain of its products. Revenue on extended warranties is
recognized ratably over the extended warranty period. Deferred revenue in relation to extended warranties has not
been material to date.
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
100
12.
Guarantees
Fiscal
Fiscal
Year
Year
Ended
Ended
June 29,
June 30,
2007
2006
(In millions)
Balance, beginning of period
$
445
$
243
Warranty accrual assumed from Maxtor
—
187
Warranties issued
217
156
Repairs and replacements
(298
)
(177
)
Changes in liability for pre
-
existing warranties, including expirations
66
36
Balance, end of period
$
430
$
445
13.
Related Party Transactions