Seagate 2013 Annual Report Download - page 38

Table of Contents
disputes, public health issues, and other events beyond our control. Such events could decrease demand for our products, make it difficult or
impossible for us to make and deliver products to our customers, or to receive components from our suppliers, and create delays and
inefficiencies in our supply chain. In the event of a natural disaster, losses and significant recovery time could be required to resume operations
and our financial condition and operating results could be materially adversely affected. Should major public health issues, including pandemics,
arise, we could be negatively affected by stringent employee travel restrictions, additional limitations in freight services, governmental actions
limiting the movement of products between regions, delays in production ramps of new products, and disruptions in our operations and some of
our key customers.
If we do not realize the expected benefits of our strategic alignment with Samsung, our business and financial condition may be materially
impaired.
We may not achieve the desired benefits from our strategic alignment with Samsung. Even if we are able to successfully integrate the
business that we acquired from Samsung into our business, we may not be able to realize the cost savings, synergies and growth that we
anticipate from this transaction in the timeframe we currently expect, and the costs of achieving these benefits may be higher than we currently
expect, because of a number of risks, including but not limited to:
• The possibility that the transaction may not further our business strategy as we expected;
• Our operating results or financial condition may be adversely impacted by liabilities that we assume in the transaction; and
• The risk of intellectual property disputes with respect to the acquired assets.
In addition, the Chinese Ministry of Commerce conditioned its approval of the Samsung acquisition on our compliance with several on-
going requirements, including: adopting measures to keep the Samsung HDD brand as a separate competitor to the Seagate HDD brand,
expanding the Samsung HDD production capacity within six months of the decision, and investing at least $800 million per year for three years
in R&D in our combined Samsung and Seagate HDD businesses. Compliance with these obligations may involve significant costs or require
changes in business practices that result in reduced revenue. Noncompliance could result in extending the time under which we would be
compelled to operate under these conditions.
As a result of these risks, the transaction may not contribute to our earnings as we expected, we may not achieve expected cost synergies
when expected, or at all, and we may not achieve the other anticipated strategic and financial benefits of this transaction.
Our ability to use our net operating loss and tax credit carryforwards might be limited.
At June 27, 2014, the use of approximately $376 million and $90 million of our U.S. net operating loss and tax credit carryforwards,
respectively, is subject to an aggregate annual limitation of $46 million pursuant to U.S. tax law. To the extent these net operating loss and tax
credit carryforwards are available, we intend to use them to reduce the corporate income tax liability associated with our operations in the U.S.
Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss or tax credit
carryforwards that might be used to offset taxable income when a corporation has undergone significant changes in ownership. As a result, future
changes in ownership, such as changes in ownership resulting from future repurchases of our ordinary shares, could put limitations on the
availability of our net operating loss or tax credit carryforwards. If certain ownership changes occur in the foreseeable future, there may be an
additional annual limitation on our ability to use our total U.S. federal and state net operating loss and credit carryforwards of $2.9 billion,
$1.8 billion, and $429 million, respectively. If these ownership changes were to occur, we estimate a one-time charge for additional U.S. income
tax expense of approximately $400 million to $500 million may be recorded in the period such
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