Seagate 2007 Annual Report Download - page 118

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
—
(
Continued)
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 three 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 27, 2008 and June 29, 2007 were as follows:
13. Related Party Transactions
Fiscal Years Ended
June 27,
2008
June 29,
2007
(In millions)
Balance, beginning of period
$
430
$
445
Warranties issued
255
217
Repairs and replacements
(263
)
(298
)
Changes in liability for pre
-
existing warranties, including expirations
23
66
Balance, end of period
$
445
$
430
Two members of our board of directors are also on the boards of directors of Microsoft Corporation (“Microsoft”) and Flextronics
International Ltd. (“Flextronics”), respectively. During fiscal years 2008 and 2007, the Company recorded net revenue of $5 million and $113
million, respectively, for sales to Microsoft. The member of our board of directors who is also a director of Flextronics resigned from the
Company’s board of directors on December 3, 2007. From June 30, 2007 through December 3, 2007, the Company recorded net revenue of
$6 million for sales to Flextronics and made purchases totaling $115 million. The Company did not record any revenue from Flextronics during
fiscal year 2007. The Company made purchases from Flextronics in fiscal year 2007 of $177 million. The Company had non-trade receivables
and accounts payable relating to Flextronics at June 29, 2007 of $66 million and $37 million, respectively. During fiscal year 2006, the Company
sold disc drives to Microsoft and certain subcontractors to Microsoft including Flextronics for use in their products. The Company recorded net
revenue of $214 million in fiscal year 2006 for sales to Microsoft and Microsoft subcontractors, including Flextronics and made purchases from
Flextronics totaling $64 million.
A member of our board of directors is on the board of directors of United Parcel Service, Inc. (“UPS”) The Company made payments for
freight and logistic services to UPS of $207 million, $160 million and $130 million in fiscal years 2008, 2007 and 2006, respectively. At June
27, 2008 and June 29, 2007, the Company had accounts payable to UPS of $30 million and $33 million, respectively.
Another individual who has been a member of our board of directors since June 2002 also became a director of Xiotech Corporation
(“Xiotech”) on November 27, 2007. The Company recorded revenue of $2 million from sales to Xiotech from November 27, 2007 to June 27,
2008. The Company’s purchases from Xiotech for the same period were not significant and its accounts receivable and accounts payable
balances at June 27, 2008 were not significant. In addition, during fiscal year 2008, the Company sold certain assets to Xiotech in exchange for
approximately $13 million in cash.
Another individual who has been a member of our board of directors since April 29, 2004 is also a director of LSI Logic Corp. The
Company recorded revenue of $48 million, $46 million and $44 million from sales to
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