Seagate 2009 Annual Report Download - page 124

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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. 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 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 fiscal years ended July 2,
2010 and July 3, 2009 were as follows:
117
Fiscal Years Ended
(In millions)
July 2,
2010 July 3, 2009
Balance, beginning of period
$
437
$
445
Warranties issued
200
263
Repairs and replacements
(214
)
(243
)
Changes in liability for pre-existing
warranties, including expirations
(51
)
(28
)
Balance, end of period
$
372
$
437