Seagate 2010 Annual Report Download - page 40

Table of Contents
shares. We will be issuing these shares from our authorized but unissued share reserves, and this issuance will have the effect of diluting the
ownership of our existing shareholders.
We expect the integration of Seagate and Samsung's hard drive business will result in revenue attrition, significant accounting charges and
increased capital expenditures that will have an adverse effect on the results and financial condition of the combined company.
The financial results of the combined company may be adversely affected by cash expenditures and non-cash charges incurred in
connection with the strategic alignment. In addition to the anticipated cash expenditures, we expect significant non-
cash charges, including those
associated with the amortization of intangible assets. We anticipate that the majority of these cash expenditures and non-cash charges will occur
in the 12 months following the closing of the combination, and will reduce earnings of the combined enterprise. In addition, the combined
company is likely to incur revenue attrition. As a result of the revenue attrition, capital expenditures and charges described above, the operating
results and financial condition of the combined company may be adversely affected after the consummation of the strategic alignment,
particularly in the first year following the closing.
The announcement and pendency of the strategic alignment could cause disruptions in the businesses of Seagate and Samsung, which could
have an adverse effect on their respective business and financial results, and consequently on the combined company.
Seagate and Samsung have operated and, until the completion of the strategic alignment, will continue to operate independently.
Uncertainty about the effect of the strategic alignment on employees, customers, distributors and suppliers may have an adverse effect on
Seagate and Samsung and consequently on the combined company. These uncertainties may impair Seagate's and Samsung's ability to retain and
motivate key personnel and could cause customers, distributors, suppliers and others with whom each company deals to seek to change existing
business relationships which may materially and adversely affect their respective businesses. Due to the materiality standards agreed to by the
parties in the Agreement, Seagate and Samsung may be obligated to consummate the transaction in spite of the adverse effects resulting from the
disruption of Seagate's and Samsung's ongoing businesses. Furthermore, this disruption could adversely affect the combined company's ability to
maintain relationships with customers, distributors, suppliers and employees after the transaction or to achieve the anticipated benefits of the
transaction. For example, in many instances, Seagate and Samsung serve the same customers, and some of these customers may decide it is
desirable to have additional or different suppliers, reducing the combined company's share of the market. Revenues that may have ordinarily
been received by Seagate or Samsung may be delayed until or after the transaction is completed or not earned at all, and cost reductions that
would ordinarily have been achieved might be delayed or not achieved at all, whether or not the transaction is completed. Moreover, efforts to
integrate Samsung's hard drive business into Seagate's operations will also divert management attention and resources. These integration matters
could have an adverse effect on each of Seagate and Samsung. Each of these events could adversely affect Samsung in the near term and the
combined company, if the transaction is completed.
Failure to complete the Merger could negatively impact the stock prices and the future business and financial results of Seagate.
If the strategic alignment is not completed, the ongoing business of Seagate may be adversely affected and Seagate will be subject to a
number of risks, including the following:
• Seagate will be required to pay Samsung a termination fee as described above;
• Seagate will be required to pay certain costs relating to the transaction, such as legal, accounting, financial advisor and related
fees whether or not the transaction is completed; and
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