SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS INC, 10-12G/A, 2000-12-27

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS INC
10-12G/A, 2000-12-27
PREPACKAGED SOFTWARE

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Filed on December 27, 2000

File No. 0-31859
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 3
To
FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)

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Delaware 77-0537234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

915 Disc Drive
Scotts Valley, California 95066
(Address of principal executive (Zip Code)
offices)

Registrant's telephone number, including area code: (831) 438-6550

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Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act:

150,000,000 Common Stock, $.001 par value per share

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Certain Forward-Looking Information

The information contained in this Registration Statement includes forward-
looking statements. Since this information is based on current expectations
that involve risks and uncertainties, actual results could differ materially
from those expressed in the forward-looking statements. Various important
factors known to Seagate Software Information Management Group Holdings, Inc.,
a Delaware corporation ("Seagate Software," "we," "us" or "our company"), that
could cause such material differences are identified in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Factors Affecting Future Operating Results" contained in Item 2 of
this Registration Statement. Certain sections of this Registration Statement
have been identified as containing forward-looking statements. The reader is
cautioned that other sections and other sentences not so identified may also
contain forward-looking information.

ITEM 1. BUSINESS

The Company

We develop, market and support an integrated product line of enterprise
reporting software and services that enable organizations to gain easy access
to information to improve business productivity. Our products help
organizations derive higher business value from their electronic data sources
and their enterprise information sources (including, but not limited to,
enterprise resource planning, customer relationship management, eCommerce and
business intelligence systems as well as data marts and data warehouses). Our
products empower individual users with the ability to access, analyze, report
and share information to make better informed business decisions.

While our primary market is North America, we have over 25 offices and
operations in 14 countries worldwide, through which we market and distribute
our products. To facilitate international use, we have translated many of our
products into French, German, Japanese, Portuguese, Italian and Spanish. In
North America, we sell our products through our direct sales force and certain
indirect sales channels, such as distributor and original equipment
manufacturer ("OEM") relationships. Outside North America, we sell our products
through our direct sales force, distributors and OEMs.

We were incorporated in Delaware in August 1999. We are a majority owned
subsidiary of Seagate Software (Cayman) Holdings, a Cayman Islands limited
corporation ("Suez Software"), which is a wholly owned subsidiary of New SAC, a
Cayman Islands limited corporation ("SAC"). As of November 30, 2000, Suez
Software held substantially all of our capital stock. Prior to November 22,
2000, we were a majority-owned subsidiary of Seagate Software Holdings, Inc.
("Seagate Software Holdings" and formerly known as Seagate Software, Inc.), a
Delaware corporation and wholly owned subsidiary of Seagate Technology, Inc.
("Seagate Technology"). Seagate Technology is a data technology company that
provides products for storing, managing and accessing digital information on
computer systems. As of September 29, 2000 and June 30, 2000, Seagate
Technology, through Seagate Software Holdings, held substantially all of our
outstanding capital stock. The outstanding minority interests in our capital
stock amounted to approximately 10.8 % and 10.5% on a fully diluted basis as of
September 29, 2000 and June 30, 2000, respectively. The minority interests
consisted of our common stock and options to purchase our common stock issued
pursuant to our 1999 and 2000 Stock Option Plans. The options to purchase our
common stock are held by certain employees, directors and consultants of our
company, our parent companies and our subsidiaries.

Seagate Software Holdings commenced operations in May 1994 in connection
with Seagate Technology's acquisition of Crystal Computer Services, Inc., a
company engaged in developing and marketing report writing software. This
acquisition was accounted for as a pooling of interests.

Prior to May 28, 1999, Seagate Software Holdings operated two distinct
business units, the Information Management Group ("IMG") business and the
Network & Storage Management Group ("NSMG") business. The NSMG business
developed and marketed software products and provided related services enabling
information technology professionals to manage distributed network resources
and to secure and protect enterprise data. On May 28, 1999, Seagate Software
Holdings contributed its NSMG business to VERITAS Software Corporation
("VERITAS") in exchange for shares of VERITAS common stock.

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In August 1999, our company was formed specifically to acquire the
operating assets and assume the liabilities of the IMG business. In connection
with our incorporation, we issued 1,000 shares of our common stock to Seagate
Software Holdings for aggregate consideration of $1,000.

On October 20, 1999, Seagate Technology acquired all outstanding shares and
options of Seagate Software Holdings. The acquisition was completed through the
merger of Seagate Daylight Merger Corp., a wholly owned subsidiary of Seagate
Technology, with and into Seagate Software Holdings. As a result of the merger,
Seagate Software Holdings became a wholly owned subsidiary of Seagate
Technology. The purpose of the transaction was to capitalize the IMG business.

On November 16, 1999, Seagate Software Holdings contributed the IMG
business to us, including the operating assets, liabilities and interests in
subsidiaries, as a contribution of capital. As consideration for the IMG
business, we issued 75,000,000 shares of our common stock to Seagate Software
Holdings. Seagate Software Holdings retained the shares of VERITAS common stock
and other non-operating assets.

Sale of Seagate Technology

SAC is a limited corporation organized under the laws of the Cayman
Islands. SAC was organized solely for the purpose of entering into the Stock
Purchase Agreement with Seagate Technology and Seagate Software Holdings.
Similar to Old SAC, SAC is controlled by Silver Lake Partners and Texas Pacific
Group. Silver Lake Partners L.P. is a private investment firm headquartered in
Menlo Park, California and New York, New York, the general partner of which is
Silver Lake Technology Associates, L.L.C. Silver Lake Technology Associates is
a Delaware limited liability company, the managing members of which are James
A. Davidson, Glenn H. Hutchins, David J. Roux and Integral Capital Partners.
Texas Pacific Group is a private investment firm headquartered in Fort Worth,
Texas, which is managed by entities controlled by David Bonderman, James G.
Coulter and William S. Price III.

SAC financed the acquisition of the Seagate Technology operating assets
through:

. Equity financing of $916 million from Silver Lake Partners, L.P., TPG
Partners III, L.P., August Capital, Chase Capital Partners, GS Private
Equity Partners, L.P. and other investors, including the following
directors of our company: Stephen J. Luczo, Gregory B. Kerfoot and
Donald L. Waite.

. A senior secured credit facility of $700 million in the aggregate
(including a $200 million revolver facility) from the Chase Manhattan
Bank, Goldman Sachs Credit Partners L.P. and Merrill Lynch Capital
Corporation.

. Senior subordinated notes of approximately $210 million issued by
Seagate Technology International.

In lieu of receiving consideration in connection with the Merger, most of
Seagate Technology's senior management team converted a portion of their
unvested Seagate Technology options and restricted stock ("rollover equity")
with an aggregate value of $184 million into equity and a deferred compensation
interest in SAC. Although the aggregate amount of cash that Seagate Technology
received from SAC was reduced by the aggregate value of this rollover equity,
the per share cash amount received by Seagate Technology (and, therefore, the
per share amount received by Seagate Technology's unaffiliated stockholders in
the Merger) was not reduced.

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Under the Stock Purchase Agreement, SAC purchased for $2.05 billion of cash
(less the value of Seagate Technology equity rolled over by former Seagate
Technology officers) all of the operating assets of Seagate Technology and its
consolidated subsidiaries, including Seagate Technology's disc drive, tape
drive and software businesses and operations, including us, and certain cash
reserves, but excluding the approximately 128 million shares of VERITAS common
stock currently held by Seagate Software Holdings and Seagate Technology's
equity investments in Gadzoox Networks, Inc. and Lernout & Hauspie Speech
Products N.V.

In addition, under the Stock Purchase Agreement, a wholly owned subsidiary
of SAC assumed substantially all of the operating liabilities of Seagate
Technology and its consolidated subsidiaries. We refer to this transaction as
the SAC Transaction. Under the Merger Agreement, immediately following and
contingent upon the consummation of the SAC Transaction, a wholly owned
subsidiary of VERITAS merged with and into Seagate Technology, and Seagate
Technology survived the merger and became a wholly owned subsidiary of VERITAS.
This wholly owned subsidiary was renamed VERITAS Software Technology
Corporation. We refer to this transaction as the Merger. VERITAS did not
acquire Seagate Technology's disc drive business or any other Seagate
Technology operating business, including our company. In the Merger, the
Seagate Technology stockholders received consideration consisting of 0.4465
shares of VERITAS common stock and $8.55 of cash per share of Seagate
Technology common stock. The Merger is intended to qualify as a tax-free
reorganization.

As part of the SAC Transaction, we and SAC have agreed to assume and
indemnify VERITAS for substantially all liabilities arising in connection with
our operating assets. On March 29, 2000, Seagate Technology, VERITAS and SAC
entered into an Indemnification Agreement, pursuant to which these entities and
certain other subsidiaries of Seagate Technology, including our company, have
agreed to certain indemnification provisions regarding tax and other matters
that may arise in connection with the SAC Transaction and the Merger.

The stockholders of each of VERITAS and Seagate Technology approved the
Merger and the SAC Transaction, as the case may be, on November 21, 2000. The
transactions contemplated by the Stock Purchase Agreement and Merger Agreement
were completed on November 22, 2000. Upon completion of the transaction, the
75,001,000 shares of our common stock that were held by Seagate Software
Holdings, were assigned to Suez Software. Our minority stockholders will
continue to hold their interests in our common stock. The Merger and the SAC
Transaction resulted in a change of control of our company, which may require
pushdown accounting, such that we may be required to reflect the fair value of
our tangible and intangible assets and liabilities as at the date of the
transaction. In addition, a majority of our assets, along with certain other
assets of Seagate Technology, are now pledged as a guarantee for debt issued to
finance the SAC Transaction. The tax allocation agreement we had with Seagate
Technology was terminated on November 22, 2000, and we will no longer file
federal income tax returns on a consolidated basis with Seagate Technology.

Immediately following the SAC Transaction, VERITAS acquired Seagate
Technology in the Merger. Because all of Seagate Technology's operating assets
were sold to SAC in connection with the leveraged buyout, VERITAS did not
acquire any of the operating assets of Seagate Technology as a result of the
Merger. As a result of the Merger each of Seagate Technology's stockholders has
the right to receive 0.4465 shares of VERITAS common stock and $8.55 of cash
per share of Seagate Technology common stock. In addition, the Seagate
Technology stockholders are entitled to their proportionate amounts of a tax
refund trust account, a class action litigation settlement of $50 million and
the shares of Lernout & Hauspie Speech Products N.V. held by Seagate Technology
at closing.

Our directors and officers had interests in the Merger and the SAC
Transaction that may have differed from those of Seagate Technology's or
VERITAS' stockholders. For example, Stephen J. Luczo and Gregory B. Kerfoot,
our Chairman and Chief Executive Officer and President, respectively, are
members of the board of directors of VERITAS. See "Item 7--Certain
Relationships and Related Transactions--Sale of Seagate Technology" for
additional information regarding the interests of our officers and directors in
the SAC Transaction and Merger.

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Industry Background--Enterprise Business Intelligence

Most large businesses around the world continue to strive to more
effectively use the information and data that they have gathered. By maximizing
their return on the significant investments they have made to obtain and
organize information, companies become more effective and ultimately more
profitable. Over the past decade, organizations began investing in software and
technologies to tackle the information challenge--these tools currently take
many forms and are generally grouped into a market termed "enterprise business
intelligence". Although broadly defined, the most common requirement of
enterprise business intelligence projects and challenges is a need to access
and present relevant data in a meaningful way to users, known as "reporting".
We believe that accelerated demand for enterprise business intelligence
software is driven by the changes brought about by the world wide web and the
advent of eBusiness, including new technical requirements, the need for
scalability and changing business problems. In addition, many organizations
have invested in many incompatible and costly first generation enterprise
business intelligence tools. We believe these factors are leading to a demand
for enterprise-wide standard reporting and enterprise business intelligence
tools that are built for the world wide web.

We believe that our products address many of the needs of the enterprise
business intelligence environment and the growing need for powerful, standards
based reporting.

Products

Our products are designed as an integrated, web-enabled platform to provide
access, analysis, interpretation and distribution of data in order to make
effective business decisions. Customers use our products to create, implement
and deploy enterprise information solutions in an application, on a desktop,
across an organization or between organizations. Our products are designed to
extend eBusiness technology architectures and for flexible deployment using the
world wide web. Our products support a variety of data sources, including
operational or legacy data stores, data marts, data warehouses, eCommerce
systems, enterprise resource planning, customer relationship management and
business intelligence systems and other data-centric computer software
applications.

Our products include:

Enterprise Products

--Seagate Info(TM)--Seagate Info is delivered as a complete suite of
software reporting and analysis tools built upon a scalable infrastructure that
allows internet, intranet, extranet and traditional client-server deployment.
Seagate Info integrates all of our products and delivers the appropriate
information across the enterprise. Seagate Info provides decision-makers with
shared access, on demand, ad hoc or managed reporting and analysis
capabilities. As a result users have fast and easy access to information.

--Partner Solution Kits--A series of software toolkits and packages that
enable closer integration with our partners' products. Most kits include data
access drivers, sample reports and data structures and may include special
documentation, support and services. We currently offer packages for Microsoft
BackOffice, SAP R/3 and Baan ERP.

Desktop Products

--Crystal Reports(R)--Crystal Reports provides software for query, report
design, application development and web report publishing functions. Provided
in a range of versions for both developers and end-users, Crystal Reports
allows users to access most types of structured data, format, design and
process a variety of reports, integrate these reports into web, windows and
enterprise applications and distribute reports to end users.

--Crystal Analysis(TM)--Based on our Crystal Reports software, Crystal
Analysis combines end user ad hoc query, analytic reporting and online
analytical processing ("OLAP"), as well as Microsoft Excel(R)

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integration, all in one simple end user focused interface. Crystal Analysis is
a client tool that can be used as an extension to any of our other products.

Analytic Applications Products

--Seagate Holos(R)--Seagate Holos, an advanced analytic application
development and deployment environment, is software designed to handle very
large amounts of relational and multi-dimensional data. Seagate Holos enables
the modeling of large amounts of data with complex business logic and then
provides multiple views of the data to enable analysis, expose trends and
accelerate decision-making. Seagate Holos integrates with and extends our
enterprise products.

--Analytic Application Templates--A collection of software templates built
for our enterprise products that accelerate customer adoption and success of
our products. Designed to address common enterprise needs and current market
demand, the current templates include applications for customer profiling,
balanced scorecard, budgeting and telecommunications billing analysis. These
packages include reports, OLAP data structures and a framework of business
logic to begin a successful implementation.

Sales and Marketing

Our sales and marketing programs are organized into geographical regions to
increase their effectiveness in each region. We adapt certain products for
foreign markets, including translation of documentation and local language
versions and localize our marketing and sales support programs accordingly.

We utilize a direct sales force and indirect sales channels, such as OEM
relationships and a network of resellers and distributors, to reach our
customers. These distributors and OEMs may also sell other products that are
complementary to or compete with ours. We provide sales and marketing programs
to encourage the sale of our products, but there can be no assurance that
distributors and OEMs will not place a higher priority on competing products.
Our agreements with distributors are generally non-exclusive and may be
terminated by either party without cause. All of our sales channels are fully
supported with an extensive organization of pre-sales and technical
specialists. Customers can also purchase some of our products by downloading
them over the internet.

Our marketing efforts are designed to increase brand awareness and
acceptance of our products. We have an international marketing strategy that
consists of several key components: targeted print advertising in trade and
technical publications; on-line advertising on our website; cooperative
marketing programs with distributors and resellers; participation in seminars
and tradeshows; direct mailings to both prospective and existing customers; as
well as extensive public relations activities and programs to build
relationships with key analysts and influential third parties. Our
international marketing groups produce or oversee the production of
substantially all of the on-line and print product literature, brochures,
advertising and similar marketing and promotional material.

We derived a substantial portion of our revenue from one customer, Ingram
Micro, Inc. ("Ingram") during the last three fiscal years. Ingram accounted for
20%, 13% and 14% of our total revenues in the fiscal years ended June 30, 2000
("fiscal 2000"), July 2, 1999 ("fiscal 1999") and July 3, 1998 ("fiscal 1998"),
respectively; and 23% and 19% for the quarters ended September 29, 2000 and
October 1, 1999, respectively. Our relationship with Ingram is subject to a
number of agreements, each of which may be terminated upon the expiration of a
required notice period. We cannot be certain that our relationship with Ingram
will continue at all or the extent to which it will continue. No other customer
accounted for more than 10% of our total revenues for the quarters ended
September 29, 2000 and October 1, 1999, or in fiscal 2000, fiscal 1999 or
fiscal 1998. Our indirect revenues include sales to distributors and OEMs and
were 41%, 39% and 40% of total revenues during fiscal 2000, fiscal 1999 and
fiscal 1998, respectively; and 38% for each of the quarters ended September 29,
2000 and October 1, 1999. Our revenues from sales outside of the United States
were 34%, 39%

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and 32% of total revenues during fiscal 2000, fiscal 1999 and fiscal 1998,
respectively; and 29% and 36% for the quarters ended September 29, 2000 and
October 1, 1999, respectively.

Professional Services, Technical Support and Maintenance

We believe that high quality, real-time customer support is important to
the successful marketing and sale of our products. We are committed to
providing a broad range of support services in an effort to ensure ongoing
customer satisfaction and influence customers' future purchasing decisions.
These services include professional services, technical support and
maintenance.

Our professional services organization provides consulting and training to
our customers worldwide. We also organize and certify a network of partner
organizations to provide extensions to our service offerings in an effort to
ensure customers fully understand the value of our whole product offering and
have a positive experience with our products.

We believe effective technical support during product evaluation
substantially contributes to the maximum benefit derived from our customers and
that post-sale support has been and will continue to be a substantial factor in
maintaining customer satisfaction. We operate technical support groups that are
located at various sites around the world, including North America and Europe.
Certain technical support groups also offer seven-day, 24-hour toll-free
telephone services. We provide pre-sale services and post-sale support to
current users and potential customers evaluating our products.

We also offer maintenance programs for certain of our products, which
generally consist of unspecified product enhancements and upgrades. We
generally sell maintenance and technical support services in 12-month periods.

Strategic Relationships

We have developed OEM and other strategic relationships with over 150
application software developers, application service providers and computer
hardware manufacturers. These strategic partners sell and support our products,
as well as integrate our products into their products. Some of our strategic
partners include PeopleSoft, SAP, Baan, IBM, Informix, Netscape, Oracle and
Computer Associates.

We also have a strategic relationship with Microsoft, which bundles our
range of access and analysis products with selected Microsoft products. For
example, Crystal Reports is bundled with several Microsoft BackOffice products
and with developer tools, such as Microsoft Visual Basic and Seagate Info is
bundled in Microsoft's BackOffice Server suite.

Research and Development

We incurred research and development expenses of $24.9 million, $21.2
million and $16.2 million in fiscal 2000, fiscal 1999 and fiscal 1998,
respectively; and $6.2 million and $5.9 million for the quarters ended
September 29, 2000 and October 1, 1999, respectively. Our customers have not
funded our research and development expenses in the quarter ended September 29,
2000 or in fiscal 2000, fiscal 1999 or fiscal 1998, respectively. We are
pursuing our product development objectives by developing new software products
and product enhancements internally, acquiring products, technologies and
businesses complementary to our existing products and forming alliances with
other technology companies.

Patents and Intellectual Property Rights

Due to the rapidly changing nature of applicable technologies, we believe
that the improvement of existing products, reliance upon trade secrets and
unpatented proprietary know-how and development of new products are generally
more important than patent protection. We have no United States, foreign issued
or

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allowed patents. We have one patent application pending in the United States
and no foreign patent applications pending. We believe that effective
protection of intellectual property rights is unavailable or limited in certain
foreign countries. In addition, the laws of many countries do not protect our
proprietary rights to as great an extent as the United States.

Our license agreements include restrictions intended to protect and defend
our intellectual property. We realize that, although we have incorporated these
restrictions, there is a possibility for unauthorized use of our software. In
addition to relying on these contractual rights, we have an ongoing trademark
registration program pursuant to which we register certain of our product
names, slogans and logos in the United States and in some foreign countries.

Competition

The segment of the software market in which we compete, is comprised of
numerous competitors and we expect competition to increase. We have recently
experienced increased competition from additional entrants into our market
including companies that specialize in the development, marketing and support
of software products that assist users to access, analyze and interpret data to
make business decisions. Many of our current and prospective competitors may
have significantly greater financial, technical and marketing resources than we
do. In addition, many of our prospective customers may have the internal
capability to implement software solutions that assist users to analyze and
interpret data to make business decisions.

The competitive factors affecting the market for our products include the
following:

. product functionality;

. performance and reliability;

. demonstrable cost effective benefits for users;

. price;

. quality of customer support and user documentation;

. ease of use and installation;

. vendor reputation;

. experience; and

. financial stability.

We believe that we currently compete effectively with respect to these
factors. Our ability to remain competitive will depend to a great extent upon
our ongoing performance in the areas of product development and customer
support. To be successful in the future, we believe that we must respond
promptly and effectively to the challenges of technological change and our
competitors' innovations by continually enhancing our product offerings.
Performance in these areas will in turn depend upon our ability to attract and
retain highly qualified technical personnel in a competitive market for
experienced and talented software developers.

Government Regulation

Our success depends on the increasing use of the internet for eCommerce and
other commercial and personal activities. Laws and regulations have been
proposed in the United States and Europe to address privacy and security
concerns related to the collection and transmission of information over the
internet. In the United States, the Federal Trade Commission (the "FTC"), is
considering regulations that may require companies to:

. give adequate notice to consumers regarding information collection and
disclosure practices;

. provide consumers with the ability to have personal, identifying
information deleted from a company's database;

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. clearly identify affiliations or a lack thereof with third parties
which may collect information or sponsor activities on a company's
website; and

. obtain express parental consent prior to collecting and using personal,
identifying information obtained from children under 13 years of age.

Under the proposed FTC regulations, businesses that violate the regulations
could face monetary fines. At the international level, the European Union (the
"EU"), has adopted a directive that imposes restrictions on the collection and
use of personal data from individuals in EU member countries. This EU directive
could affect internet businesses elsewhere that have users in one or more EU
member countries. The proposed FTC regulations, if adopted, or the EU
directive, as adopted, could adversely affect the ability of internet
businesses to collect demographic and personal information from users, which
could have an adverse effect on the ability of internet businesses to target
product offering and attract advertisers. Any of these developments could harm
the results of operation and financial condition of internet businesses and
impair the growth of the internet. In addition to government regulations
related to internet privacy concerns, it is possible that any number of
additional laws and regulations may be adopted with respect to the internet
covering issues such as obscenity, freedom of expression, pricing, content and
quality of products and services, copyright and other intellectual property
issues and taxation. As an example, a number of proposals have been made at the
federal and local level and by various foreign governments to impose taxes on
the sale of goods and services and other internet activities.

Recently, the U.S. Internet Tax Information Act was enacted, which places a
three-year moratorium on new state and local taxes on internet commerce.
However, the moratorium does not prevent the U.S. federal government or foreign
governments from adopting laws that impose taxes on internet commerce. The
passage of new laws or changes to existing laws intended to address use of the
internet could create uncertainty in the marketplace, increase the cost of
doing business on the internet, increase legal liabilities from doing business
on the internet or in some other manner have a negative impact on internet
commerce and substantially impair its growth. If use of the internet decreases,
our customers may purchase fewer licenses for our products, which would cause
our license and maintenance revenue to fall.

Employees

As of September 29, 2000, we had 1,214 employees, including 381 in sales
and marketing, 354 in services and support, 337 in research and development and
142 in general and administrative functions. None of our employees are
represented by a labor union or are the subject of a collective bargaining
agreement. We have never experienced a work stoppage and believe that our
employee relations are good.

We believe our future success will depend in large part upon our ability to
attract and retain highly skilled managerial, engineering, sales and marketing
and finance personnel. The loss of the services of any of our key personnel,
the inability to attract or retain qualified personnel in the future or delays
in either hiring required personnel or the rate at which new people become
productive, particularly sales personnel and engineers, could have a material
adverse effect on our business, operating results and financial condition.
Competition for qualified employees is intense in the software industry.

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ITEM 2. FINANCIAL INFORMATION

Seagate Software Holdings contributed its IMG business to us on November
16, 1999 in exchange for 75,000,000 shares of our common stock. The
accompanying selected historical consolidated and combined financial data have
been prepared using the historical basis of accounting and are presented as if
we had existed as an entity separate from Seagate Software Holdings during the
periods presented. The consolidated and combined financial statements include
the historical assets, liabilities, revenues and expenses that are directly
related to our operations. For all periods prior to November 16, 1999, the
combined financial statements present the combined historical financial
position, results of operations, equity and cash flows of the ongoing IMG
business of Seagate Software Holdings that were contributed to us and are not
necessarily indicative of what the financial position, results of operations,
equity or cash flows would have been had we been an independent legal entity
during the periods presented.

You should read the following selected financial data in conjunction with
our consolidated and combined financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Registration Statement. We have derived
our selected statement of operations data for the quarters ended September 29,
2000 and October 1, 1999 and the selected balance sheet data as of September
29, 2000 from the unaudited consolidated and combined financial statements
included elsewhere in this Registration Statement. We have derived our selected
statement of operations data for the fiscal years ended June 30, 2000, July 2,
1999 and July 3, 1998 and the selected balance sheet data as of June 30, 2000
and July 2, 1999 from the audited consolidated and combined financial
statements included elsewhere in this Registration Statement. The selected
consolidated financial data for the fiscal years ended June 27, 1997 and June
28, 1996 and the selected balance sheet data as of October 1, 1999, July 3,
1998, June 27, 1997 and June 28, 1996 were derived from our unaudited combined
financial statements that are not included in this Registration Statement. We
prepared the unaudited financial statements on substantially the same basis as
the audited combined financial statements and, in our opinion, they include all
adjustments, consisting principally of normal recurring adjustments, that we
consider necessary for a fair presentation of our financial position and
results of operations for the period. Historical results are not necessarily
indicative of results of operations to be expected for future periods.

<TABLE>
<CAPTION>
For the quarters ended For the years ended
------------------------ ----------------------------------------------------------
September 29, October 1, June 30, July 2, July 3, June 27, June 28,
2000 1999 2000(1) 1999(2) 1998 1997 1996
------------- ---------- ---------- ---------- ---------- ---------- ----------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 36,904 $ 27,877 $ 126,518 $ 141,757 $ 115,952 $ 74,534 $ 23,843
Gross profit............ $ 25,804 $ 16,311 $ 82,543 $ 93,056 $ 80,196 $ 58,745 $ 22,169
Loss from operations.... $ (3,127) $ (12,997) $ (276,237) $ (98,957) $ (4,993) $ (20,207) $ (36,152)
Net loss................ $ (2,179) $ (4,652) $ (221,162) $ (96,375) $ (13,259) $ (20,507) $ (35,681)
Net loss per share
Basic and diluted....... $ (0.03) $ (0.06) $ (2.95) $ (1.28) $ (0.18) $ (0.27) $ (0.48)
Total assets............ $ 72,803 $ 80,324 $ 71,280 $ 79,820 $ 63,569 $ 53,854 $ 64,344
Stockholders' equity.... $ 22,020 $ (1,790) $ 23,113 $ 2,883 $ 16,641 $ 30,311 $ 50,667
Number of shares used in
net loss per share
Basic and diluted....... 75,073,753 75,001,000 75,001,391 75,001,000 75,001,000 75,001,000 75,001,000
</TABLE>
--------
(1) The net loss for fiscal 2000 includes unusual items of $242,569 described
in the October 1999 Seagate Technology Exchange of Shares.
(2) The net loss for fiscal 1999 includes unusual items of $86,714 described
in the June 1999 Seagate Technology Exchange Offer.

9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain Forward-Looking Information

The following discussions should be read in conjunction with the audited
consolidated and combined financial statements and notes thereto and the other
information included elsewhere in this Registration Statement. Certain
statements in this Management's Discussion and Analysis of Financial Condition
and Results of Operations and contained elsewhere in this Registration
Statement are forward-looking statements based on current expectations and
entail various risks and uncertainties that could cause actual results to
differ from those projected in such forward-looking statements. Certain of
these risks and uncertainties are set forth below in the sections captioned "--
Liquidity and Capital Resources" and "--Factors Affecting Future Operating
Results". Certain sections in this Registration Statement have been identified
as containing forward-looking statements. The reader is cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.

Overview

We develop, market and support an integrated product line of end user
enterprise software products, which enable business users, developers and
information technology professionals to access, analyze, report on and
distribute enterprise information. We believe our products meet an extensive
range of data-centric business needs commonly described as enterprise
reporting, enterprise business intelligence, enterprise portals, developer
reporting tools, analytic application development and packaged analytic
applications. We have over 25 offices and operations in 14 countries worldwide,
including significant operations and certain administrative functions in
Vancouver, Canada.

We derive most of our revenues from the sale of licenses for our software
products. We also generate revenues from services that support our products
such as technical support, training, consulting and maintenance.

We recognize revenues in accordance with Statement of Position ("SOP") 97-
2, "Software Revenue Recognition," as amended by SOP 98-4 "Deferral of the
Effective Date of a Provision of SOP 97-2" and by SOP 98-9 "Modification of SOP
97-2, Software Revenue Recognition with Respect to Certain Transactions." These
amendments deferred and then clarified, respectively, the specification of what
was considered vendor specific objective evidence ("VSOE") of fair value for
the various elements in a multiple element arrangement. We adopted the
provisions of SOP 97-2 and SOP 98-4 as of the beginning of fiscal year 1999 and
adopted SOP 98-9 as of the beginning of fiscal year 2000.

SOP 97-2 requires that the total arrangement fee from software arrangements
that include rights to multiple software products, post contract customer
support and/or other services be allocated to each element of the arrangement
based on their relative fair values. Under SOP 97-2, the determination of fair
value is based on VSOE. Fair value is established for each element based on its
individual sales prices consistent with our pricing strategy. Our pricing
strategy is established by our pricing group, consisting of representatives
from our marketing, sales, finance and product development departments.

We typically can establish VSOE for all elements of multi-element
arrangements, and accordingly, revenues are allocated to the individual
elements on the basis of VSOE. Although not typical, some OEM arrangements
contain end-user maintenance elements for which VSOE has not been established,
as sufficient evidence of consistent pricing and renewal rates has not been
present. In such arrangements, we have recognized the arrangement fee ratably
over the maintenance period in accordance with the provisions set forth in SOP
97-2.

We generally recognize licensing revenues, whether sold direct or through
resellers, upon product delivery, provided persuasive evidence of an
arrangement exists, fees are fixed or determinable and the resulting

10
<PAGE>

receivable is deemed collectible by management. In instances where payments
are subject to extended payment terms, we do not recognize revenues until the
date payments become due. When an acceptance period is specified in an
arrangement, we recognize revenues upon the earlier of customer acceptance or
the expiration of the acceptance period.

Our policy is not to recognize revenues on sales to distributors or
resellers, if resale contingencies exist. Some of the factors that are
considered to determine the existence of such contingencies include payment
terms, collectability and history with the distributor or reseller. We
recognize revenues when such contingencies are resolved and the criteria for
revenue recognition in SOP 97-2 are met.

We recognize revenues for sales to distributors and resellers with rights
of returns when the criteria for recognizing revenues, as outlined in SFAS 48,
are met. However, we make estimates of future returns and reduce the revenues
and related receivables accordingly by the amount of such estimates.

Where rights of return exist and the criteria of SFAS 48 are not met, we
do not recognize revenues until such time that all of the criteria are met. We
consider factors including historical experience, nature of the product, fixed
or determinable fees, arms length contract terms, the level of inventory in
the distribution channels and the ability to reasonably estimate returns.

We recognize revenues from technical support and maintenance ratably over
the term of the arrangement, generally one year. We recognize revenues from
training and consulting as the services are performed.

Where our software arrangements require us to provide consulting services
for significant production, modification or customization of software, or
where these services are essential to the functionality of the software, we
recognize revenues in accordance with the provisions of SOP 81-1, "Accounting
for Performance of Construction-Type and Certain Production-Type Contracts".
In these arrangements, we recognize both the licensing revenues and consulting
services revenues on the percentage of completion method based on cost inputs.

We operate on a fiscal year that comprises 52 or 53 weeks that ends on the
Friday closest to June 30.

Development of Business

In August 1999, we were formed to acquire Seagate Software Holdings' IMG
business. On November 16, 1999, Seagate Software Holdings contributed the IMG
business to us in exchange for 75,000,000 shares of common stock. Prior to
November 16, 1999, Seagate Software Holdings entered into two separate share
exchange transactions with Seagate Technology. The first, the "June 1999
Seagate Technology Exchange Offer", relates to an offer Seagate Technology
made to the optionees and stockholders of Seagate Software Holdings to
exchange shares of Seagate Software Holdings common stock for shares of
Seagate Technology common stock. The June 1999 Seagate Technology Exchange
Offer was made at the time of the contribution of the NSMG business to
VERITAS. The second exchange transaction, the "October 1999 Seagate Technology
Exchange of Shares" was the result of a reorganization of Seagate Software
Holdings. This reorganization resulted in Seagate Software Holdings becoming a
wholly owned subsidiary of Seagate Technology and the minority stockholders of
Seagate Software Holdings received Seagate Technology common stock for their
Seagate Software Holdings common stock and options. Each of the June and
October exchanges resulted in Seagate Software Holdings recording compensation
expense for stock options and shares held less than six months and purchase
accounting where shares were held by minority shareholders longer than six
months. A portion of the amount of excess purchase price and compensation
expense was allocated to us, as explained below.

The June 1999 Seagate Technology Exchange Offer

11
<PAGE>

on June 9, 1999, Seagate Technology exchanged 5,275,772 shares of Seagate
Technology common stock for 3,267,255 shares of Seagate Software Holdings
common stock owned by employees, directors and consultants of Seagate Software
Holdings and its parent and subsidiaries. The exchange ratio was determined
based on the estimated value of Seagate Software Holdings common stock divided
by the fair market value of Seagate Technology common stock.

The estimated value of Seagate Software Holdings common stock exchanged
into Seagate Technology common stock was determined based upon the sum of the
fair value of the NSMG business, as measured by the fair value of the shares
received from VERITAS, plus the estimated fair value of the IMG business of
Seagate Software Holdings as determined by the Seagate Software Holding's Board
of Directors, plus the assumed proceeds from the exercise of all outstanding
Seagate Software Holdings stock options, divided by the number of fully
converted shares of Seagate Software Holdings. The Board of Directors of
Seagate Software Holdings considered a number of factors in determining the
estimated fair value of the IMG business, including historical and projected
revenues, earnings and cash flows, as well as other factors and consultations
with financial advisors.

Seagate Software Holdings recorded the acquisition of its common stock by
Seagate Technology as an acquisition of the minority interest by Seagate
Technology. Seagate Software Holdings accounted for the exchange of shares of
its common stock outstanding and vested more than six months as the purchase of
a minority interest and, accordingly, the fair value of the shares exchanged of
$51.8 million was allocated to all the identifiable tangible and intangible
assets and liabilities of Seagate Software Holdings. For those shares
outstanding and vested less than six months, the fair value of the shares
purchased less the original purchase price paid by the employees was recorded
as compensation expense as this constitutes an early settlement of an award of
stock or grant of an option. Compensation expense associated with the issuance
of Seagate Technology shares amounted to approximately $102.5 million, plus
$630,000 of employer portion of payroll taxes.

Related to the June 1999 Seagate Technology Exchange Offer, Seagate
Software Holdings recorded additional compensation expense of $8.6 million for
the purchase of unvested stock options held by certain continuing employees.
This amount was not considered a capital contribution from Seagate Technology.
In addition, Seagate Software Holdings recorded compensation expense amounting
to $12.7 million for accelerated vesting on certain stock options for its
former Chief Executive Officer and several other employees, each of whom became
employees of VERITAS.

Our consolidated and combined statement of operations for fiscal 1999
includes an allocation of compensation expense arising from the June 1999
Seagate Technology Exchange Offer attributable to us. Compensation expense was
allocated to us on the basis of employees specifically identified with our
business who participated in the exchange and for those employees of Seagate
Software Holdings and Seagate Technology who performed services for us, on the
basis of time estimates. Accordingly, we recorded $77.5 million of the $102.5
million of total compensation expense as a capital contribution from Seagate
Technology. In addition, both the $630,000 relating to the employer portion of
payroll taxes and the $8.6 million compensation expense for the purchase of
unvested stock options relate to certain of our continuing employees and
therefore both amounts were reflected as expenses for fiscal 1999. We did not
allocate any of the $12.7 million compensation expense that arose from the
accelerated vesting on certain stock options for employees who became employees
of VERITAS because the compensation expense was not attributable to our
employees.

Our consolidated and combined financial statements for fiscal 1999 also
include an allocation of $5.4 million of the $51.8 million purchase price
allocation described above. The allocation to us was based on the fair value of
our assets relative to Seagate Software Holdings. A number of factors were
considered in determining our estimated fair value, including historical and
projected revenues, earnings and cash flows, as well as other factors and
consultations with financial advisors.

12
<PAGE>

The allocation of the purchase price to our intangible assets as of June 9,
1999 was as follows:

<TABLE>
<S> <C>
Developed technologies............ $ 686,000
Trademark......................... 158,000
Assembled workforce............... 207,000
In-process research and
development..................... 109,000
Goodwill.......................... 4,700,000
Deferred tax liability............ (412,000)
----------
Total purchase price allocated.. $5,448,000
==========
</TABLE>

Methodology

The excess purchase price attributable to us was allocated to intangible
and tangible assets based on their fair market values for our company on a
stand-alone basis in accordance with the provisions of Accounting Principles
Board ("APB") Opinions No. 16 and 17.

Our tangible net assets principally include cash, intercompany loan
receivable and payable, accounts receivable, other current assets and capital
assets. Liabilities principally include accounts payable, accrued employee
compensation and other accrued liabilities.

To estimate the value of the developed technologies, we discounted the
expected future cash flows attributable to all existing technology, taking into
account risks related to the characteristics and applications of the
technology, existing and future markets and assessments of the life cycle stage
of the technology.

We estimated the value of trademarks by considering, among other factors,
the assumption that in lieu of ownership of a trademark, a company would be
willing to pay a royalty in order to exploit the related benefits of such
trademark.

We estimated the value of the assembled workforce as the costs to replace
the existing employees, including recruiting, hiring and training costs for
each category of employee.

We charged the value allocated to projects identified as in-process
technology for the minority interest acquired to expense. These write-offs were
necessary because the acquired technologies had not reached technological
feasibility at the date of purchase and had no future alternative uses. We
expect that the acquired in-process research and development will be
successfully developed, but there can be no assurance that commercial viability
of these products will be achieved.

The nature of the efforts required to develop the purchased in-process
technology into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements. We estimated the value of our purchased in-process
technology as the projected net cash flows related to such products, including
costs to complete the development of the technology and the future revenues to
be earned upon commercialization of the products, excluding revenues
attributable to future development efforts. We then discounted these cash flows
back to their net present value. The projected net cash flows from such
projects were based on our estimates of revenues and operating profits related
to such projects.

Goodwill is calculated as the residual difference between the estimated
amount of excess purchase price allocated to us and the values assigned to
identifiable tangible and intangible assets and liabilities.

The October 1999 Seagate Technology Exchange of Shares

On October 20, 1999, the minority stockholders of Seagate Software Holdings
approved the merger of Seagate Daylight Merger Corp., a wholly owned subsidiary
of Seagate Technology, with and into Seagate

13
<PAGE>

Software Holdings. Seagate Software Holdings assets consisted of the assets of
the IMG business and its investment in the common stock of VERITAS. The merger
was effected on October 20, 1999. Upon the closing of the merger, Seagate
Software Holdings became a wholly owned subsidiary of Seagate Technology. All
outstanding options to purchase Seagate Software Holdings common stock were
accelerated immediately prior to the merger. In connection with the merger,
Seagate Software Holdings minority stockholders and optionees received payment
in the form of 3.23 shares of Seagate Technology's common stock per share of
Seagate Software Holdings common stock, less any amounts due for the payment of
the exercise price of unexercised options. Seagate Technology issued 9,124,046
shares of its common stock from treasury shares to optionees and minority
stockholders of Seagate Software Holdings in connection with the merger.

Seagate Technology accounted for the exchange of shares of its common stock
as the acquisition of a minority interest for Seagate Software Holdings common
stock outstanding and vested more than six months held by employees and all
stock held by former employees and consultants. The fair value of the shares of
Seagate Technology issued was $19.4 million and was recorded as purchase price
and allocated to all the identifiable tangible and intangible assets and
liabilities of Seagate Software Holdings. Seagate Technology accounted for the
exchange of shares of its common stock for stock options in Seagate Software
Holdings held by employees and stock held and vested by employees less than six
months as the settlement of an earlier stock award. Seagate Technology recorded
compensation expense of $283.6 million, plus $2.1 million of employer portion
of payroll taxes, related to the purchase of minority interest in Seagate
Software Holdings.

Our consolidated and combined statement of operations for fiscal 2000
includes an allocation of compensation expense arising from the October 1999
Seagate Technology exchange of shares attributable to us. Compensation expense
was allocated to us on the basis of employees specifically identified with our
business and for those employees that performed services for us, on the basis
of time estimates. Accordingly, we recorded $239.6 million of the $283.6
million compensation expense related to the October 1999 Seagate Technology
Exchange of Shares as a capital contribution from Seagate Technology. In
addition, the $2.1 million of payroll taxes paid related to our employees and
therefore the amount was recorded as an expense for fiscal 2000.

In addition, $877,000 of legal and accounting costs were incurred by us in
connection with our recapitalization and reorganization.

Our consolidated and combined financial statements for fiscal 2000 also
include an allocation of $1.2 million of the $19.4 million purchase price
allocation described above. The allocation was based on the fair value of our
assets relative to the fair value of Seagate Software Holdings. A number of
factors were considered in determining our estimated fair value including
historical and projected revenues, earnings and cash flows, as well as other
factors and consultations with financial advisors.

The allocation of the purchase price to our intangible assets as at October
20, 1999 was as follows:

<TABLE>
<S> <C>
Developed technologies...................................... $ 156,000
Trademark................................................... 36,000
Assembled workforce......................................... 47,000
In-process research and development......................... 25,000
Goodwill.................................................... 1,071,000
Deferred tax liability...................................... (94,000)
----------
Total purchase price allocated............................ $1,241,000
==========
</TABLE>

The excess purchase price attributable to us was allocated to intangible
and tangible assets based on their fair market values in the same manner
described above for the June 1999 Seagate Technology Exchange Offer.

14
<PAGE>

Seagate Software Stock Option Plans

In November 1999 and June 2000, our board of directors approved our 1999
Stock Option Plan ("1999 Plan") and our 2000 Stock Option Plan ("2000 Plan"),
respectively (collectively the "IMG Plans"). The IMG Plans provide for grants
of incentive stock options to employees, including officers and employee
directors and nonstatutory stock options to employees and consultants,
including nonemployee directors of our company, our parent and subsidiary
companies. The purposes of the IMG Plans are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentives to our employees and consultants and to promote the
success of our business.

The number of options granted under each Plan and the vesting terms are
described below:

1999 Stock Option Plan

Our board of directors reserved 22,500,000 shares of common stock for
issuance under the 1999 Plan. Options granted under the 1999 Plan are granted
at fair market value and vest over 48 months, with 25% vesting upon completion
of one year from the date of grant and the remaining options vesting at the
rate of 1/48th per month thereafter.

As of September 29, 2000 and June 30, 2000, we had issued 226,050 and 1,050
shares to date, respectively, of common stock upon the exercise of options
granted under the 1999 Plan and had options to purchase 8,721,716 and 8,626,879
shares of our common stock outstanding, respectively.

2000 Stock Option Plan

Our board of directors reserved 200,000 shares of common stock for issuance
under the 2000 Plan. Options granted under the 2000 Plan are granted at fair
market value and become fully vested and exercisable immediately prior to a
merger or asset sale (excluding the SAC transaction), or on the date upon which
an initial public offering of our common stock is declared effective by the
United States Securities Exchange Commission. We will recognize compensation
expense upon vesting of these options as all of the options under this plan
have been granted to employees of our parent or another subsidiary within the
consolidated group.

As of each of September 29 2000, and June 30, 2000, options to purchase
161,450 shares of our common stock were outstanding; however no shares had been
issued upon the exercise of options under the 2000 Plan.

Sale of Seagate Technology

On March 29, 2000, Seagate Technology, Seagate Software Holdings and Old
SAC, an entity affiliated with, among others, Silver Lake Partners and Texas
Pacific Group, entered into the Stock Purchase Agreement and Seagate
Technology, VERITAS and a wholly owned subsidiary of VERITAS entered into the
Merger Agreement. The SAC Transaction and the Merger occurred on November 22,
2000.

Under the Stock Purchase Agreement, SAC purchased for cash, all of the
operating assets of Seagate Technology and its consolidated subsidiaries,
including Seagate Technology's disc drive, tape drive and software businesses
and operations, including our company and certain cash reserves. Upon
completion of the transaction, the 75,001,000 shares of our common stock held
by Seagate Software Holdings were assigned to Suez Software.

The SAC Transaction resulted in a change in control of our company, which
may require pushdown accounting such that we may be required to reflect the
fair value of our tangible and intangible assets and liabilities as at the
close of the transaction.

The tax allocation agreement we had with Seagate Technology was terminated
on November 22, 2000, and we and Seagate Technology will no longer file federal
income tax returns on a consolidated basis.

15
<PAGE>

Therefore, Seagate Technology will not benefit from nor will it reimburse us
pursuant to the Tax Allocation Agreement for tax losses we sustain subsequent
to consummation of the transaction. In prior periods, we have generated
substantial cash payments from our tax losses utilized by Seagate Technology,
which we have used to reduce our obligations to Seagate Technology under the
intercompany revolving loan agreement (the "revolving loan agreement"). As a
result of the termination of the tax allocation agreement, we may not be able
to convert any future tax losses into cash.

We rely on a revolving loan with Seagate Technology LLC, which is now a
wholly owned subsidiary of SAC, to fund a portion of our operating cash needs.
The revolving loan agreement continues in effect subsequent to the closing of
the SAC Transaction on November 22, 2000. We may require additional financing
through the end of fiscal 2002. We are in the process of negotiating additional
financing with Seagate Technology LLC through the end of fiscal 2002. Should
additional financing not be available from Seagate Technology LLC at terms that
are satisfactory to us and Seagate Technology LLC, we may seek additional
equity and financing from other sources. However, as a result of the SAC
transaction, we pledged a majority of our assets to guarantee the debt used to
finance the SAC Transaction. As a result, our ability to raise additional
secured debt from other sources may be limited.

16
<PAGE>

Results of Operations

The following table sets forth certain consolidated statement of operations
data as a percent of total revenues for the period indicated:

<TABLE>
<CAPTION>
For the quarters ended For the years ended
------------------------ ---------------------------------------
September 29, October 1,
2000 1999 June 30, 2000 July 2, 1999 July 3, 1998
------------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Licensing............. 62% 54% 59% 65% 70%
Maintenance, support
and services........ 38% 46% 41% 35% 30%
--- --- --- --- ---
Total revenues..... 100% 100% 100% 100% 100%
=== === === === ===
Cost of revenues:
Licensing............. 3% 2% 3% 3% 3%
Maintenance, support
and services........ 27% 39% 31% 25% 23%
Amortization of
developed
technologies........ 0% 0% 0% 3% 5%
Write-off of
developed
technologies........ 0% 0% 0% 3% 0%
--- --- --- --- ---
Total cost of
revenues......... 30% 41% 34% 34% 31%
=== === === === ===
Gross profit margin..... 70% 59% 66% 66% 69%
=== === === === ===
Operating expenses:
Sales and marketing... 48% 62% 52% 46% 44%
Research and
development......... 17% 21% 20% 15% 14%
General and
administrative...... 11% 16% 17% 10% 13%
Amortization of
goodwill and other
intangibles......... 1% 5% 2% 3% 3%
Unusual items......... 0% 1% 192% 61% 0%
Restructuring costs... 2% 0% 1% 0% 0%
--- --- --- --- ---
Total operating
expenses......... 79% 105% 284% 135% 74%
=== === === === ===
</TABLE>

Quarters Ended September 29, 2000 and October 1, 1999

Revenues

Total revenues increased by 32% from $27.9 million for the quarter ended
October 1, 1999 to $36.9 million for the quarter ended September 29, 2000. The
increase in total revenues was primarily attributable to increased productivity
of our sales force, resulting in an expansion of our customer base. The
increase in our customer base resulted in increases in licensing revenues and
maintenance, support and services revenues.

During the quarter ended September 29, 2000 and the quarter ended October
1, 1999, revenues from a third-party customer, Ingram, accounted for more than
10% of the consolidated revenues for a total of $8.3 million and $5.3 million,
respectively.

Licensing revenues. Licensing revenues consist of license fees for our
products. Licensing revenues increased 51% from $15.2 million for the quarter
ended October 1, 1999 to $23.0 million for the quarter ended September 29,
2000. The increase in licensing revenues was primarily attributable to
increased productivity of

17
<PAGE>

our sales force, resulting in an increase in our customer base, as well as
additional sales to our existing customers. The increase also resulted from
increased sales of an upgraded and enhanced version of Crystal Reports,
released in February 2000.

Maintenance, support and services revenues. Our maintenance, support and
services revenues were comprised of revenues from technical support, training
activities, consulting services and maintenance related to licenses of our
products. Maintenance, support and services revenues increased 10% from $12.7
million for the quarter ended October 1, 1999 to $13.9 million for the quarter
ended September 29, 2000. The increase in maintenance, support and services
revenues was attributable to the higher cumulative installed customer base,
which resulted in increased sales of maintenance agreements and training and
consulting services. As a percentage of total revenues, maintenance, support
and services revenues have decreased to 38% for the quarter ended September 29,
2000 from 46% for the quarter ended October 1, 1999. The decline in
maintenance, support and service revenues as a percentage of revenues was
caused by greater growth in licensing revenues for the quarter ended September
29, 2000.

Revenues by geographic location were as follows:

<TABLE>
<CAPTION>
For the quarters ended
------------------------
September 29, October 1,
2000 1999
------------- ----------
(In thousands)
<S> <C> <C>
Revenues by geography:
United States...................................... 26,135 17,811
Europe............................................. 6,634 6,823
Other.............................................. 4,135 3,243
------- -------
$36,904 $27,877
======= =======
</TABLE>

Revenues from sales in Europe and other regions outside of the United
States represented 29%, and 36% of total revenues for the quarters ended
September 29, 2000 and October 1, 1999, respectively. Combined revenues from
sales in Europe and other regions outside the United States increased by 7%
from $10.1 million for the quarter ended October 1,1999 to $10.8 million for
the quarter ended September 29, 2000. The increase in sales from Europe and
other regions outside the United States was primarily attributable to the
expansion of our customer base and sales channels. Sales in Europe and other
regions outside of the United States declined as a percentage of total revenues
because sales productivity increased more significantly in the United States
for the quarter ended September 29, 2000 than sales in Europe and other regions
outside of the United States. To date, seasonal reductions in business activity
in the summer months in Europe and certain other regions have not had a
material impact on our operating results.

Historically, a significant portion of our revenues were denominated and
collected in Canadian Dollars, Deutsche Marks, British Pounds Sterling, French
Francs, the Australian Dollar and Japanese Yen. We expect a significant portion
of our revenues to be denominated and collected in the Single European Currency
("Euro") in the future. To date, the foreign exchange gains and losses on
transactions and revenues reported by our foreign subsidiaries have not been
significant nor have any costs related to the Euro conversion. In addition,
since most of our foreign operations conduct business in their local currency,
our earnings are not significantly impacted by fluctuations in exchange rates.
Translation adjustments from consolidation of such foreign operations are
presented within comprehensive income.

Cost of Revenues

Cost of revenues decreased by 4% to $11.1 million for the quarter ended
September 29, 2000 from $11.6 million for the quarter ended October 1, 1999. As
a percent of total revenues, cost of revenues was 30% for the quarter ended
September 29, 2000 and 41% for the quarter ended October 1, 1999. Our gross
margins, as a percentage of revenues, have increased from 59% for the quarter
ended October 1, 1999 to 70% for the

18
<PAGE>

quarter ended September 29, 2000. The reduction in cost of revenues and
corresponding increase in our gross margins are partly attributable to a change
in the revenues mix during the quarter toward licensing revenues as well as
from a corporate-wide initiative to manage costs, while supporting revenues
growth.

Cost of licensing revenues. The cost of licensing revenues consists
primarily of materials, packaging and distribution of software, related
fulfillment personnel and third party royalties. The cost of licensing revenues
increased by 66% to $1.0 million for the quarter ended September 29, 2000 from
$619,000 for the quarter ended October 1, 1999. As a percent of licensing
revenues, cost of licensing revenues was constant at 4% for the quarters ended
September 29, 2000 and October 1, 1999. The increase in cost of licensing
revenues in dollars was due primarily to the increased volume of shipments
during the quarter ended September 29, 2000 compared to the quarter ended
October 1, 1999.

Cost of maintenance, support and services revenues. The cost of
maintenance, support and services revenues consists of personnel and related
overhead costs for technical support, training, consulting, maintenance
services and the cost of materials delivered with enhancement releases. The
cost of maintenance, support and services revenues decreased 8% to $10.0
million for the quarter ended September 29, 2000 from $10.9 million for the
quarter ended October 1, 1999. As a percent of maintenance, support and
services revenues, cost of maintenance, support and services revenues was 72%
for the quarter ended September 29, 2000 and 86% for the quarter ended October
1, 1999. The decline as a percentage of revenues for the quarter ended
September 29, 2000 is primarily attributable to a decline in maintenance,
support and services costs, as part of a corporate-wide initiative to control
costs, combined with an increase in total revenues.

Amortization of developed technologies. Amortization of developed
technologies increased 23% to $53,000 for the quarter ended September 29, 2000
from $43,000 for the quarter ended October 1, 1999. As a percent of total
revenues, amortization of developed technologies were negligible for both
quarters presented.

Operating Expenses

Sales and Marketing. Sales and marketing expenses include salaries,
commissions and bonuses earned by sales and marketing personnel, advertising
and product promotional activities and related facilities and other costs.
Sales and marketing expenses increased 2% to $17.6 million for the quarter
ended September 29, 2000 from $17.2 million for the quarter ended October 1,
1999. As a percent of total revenues, sales and marketing expenses decreased to
48% for the quarter ended September 29, 2000 from 62% for the quarter ended
October 1, 1999. The dollar increase in sales and marketing expenses was
primarily due to the expansion of our sales force. The decrease as a percentage
of revenues was primarily attributable to the increase in productivity of our
sales force and the resultant increase in revenues.

Research and Development. Research and development expenses consist
primarily of personnel and related costs associated with the development of new
products, the enhancement and localization of existing products, quality
assurance and testing. Research and development expenses increased 6% to $6.2
million for the quarter ended September 29, 2000 from $5.9 million for the
quarter ended October 1, 1999. As a percent of total revenues, research and
development expenses decreased to 17% for the quarter ended September 29, 2000
from 21% for the quarter ended October 1, 1999. The increases in research and
development expenses in absolute dollars were primarily due to increases in
personnel and related expenses.

General and Administrative. General and administrative expenses consist
primarily of personnel costs for finance, legal, human resources, information
systems and other overhead costs. General and administrative expenses decreased
5% to $4.2 million for the quarter ended September 29, 2000 from $4.4 million
for the quarter ended October 1, 1999. As a percent of total revenues, general
and administrative expenses decreased to 11% for the quarter ended September
29, 2000 from 16% for the quarter ended October 1, 1999. The decrease was
primarily attributable to a decline in bad debt expense for the quarter ended
September 29, 2000 because of a reduced accounts receivable balance and
significantly improved days sales outstanding.

19
<PAGE>

Amortization of Goodwill and Other Intangibles. Amortization of goodwill
and other intangibles decreased 74% to $389,000 for the quarter ended September
29, 2000 from $1.5 million for the quarter ended October 1, 1999. As a percent
of total revenues, amortization of goodwill and other intangibles decreased to
1% for the quarter ended September 29, 2000 from 5% for the quarter ended
October 1, 1999. The decrease in amortization of goodwill and other intangibles
was attributable to intangible assets that were fully amortized by the end of
the quarter ended October 1, 1999.

Restructuring Costs. Restructuring charges were $573,000 during the quarter
ended September 29, 2000, representing 2% of total revenues. The charges relate
to the closure of eight offices in Europe and are part of a restructuring plan
announced in September 2000 to consolidate the European sales organization into
fewer office locations. The charges were primarily comprised of costs related
to the termination of office leases and other related office closure costs, as
well as severance and benefits due to nine sales and marketing employees who
were terminated in September 2000. As at September 29, 2000, the $573,000 was
included in accrued expenses and is expected to be paid by the quarter ending
March 30, 2001. Management believes this restructuring is not significant and
it will not have a material impact on our future revenues, operating costs or
operating results. No restructuring charges were incurred during the quarter
ended October 1, 1999.

Unusual Items. There were no unusual items for the quarter ended September
29, 2000, compared to $354,000 for the quarter ended October 1, 1999. Unusual
items consisted of professional fees related to the October 1999 Seagate
Technology Exchange of Shares.

Interest and other, net. Interest and other, net consists of interest
income, interest expense and net foreign currency exchange gain. Interest and
other, net increased to income of $222,000 for the quarter ended September 29,
2000, from expense of $422,000 for the quarter ended October 1, 1999. Interest
and other, net fluctuates depending on fluctuations in the LIBOR interest rate,
our net outstanding loan balance with Seagate Technology and foreign currency
exchange rates. Interest is computed on the outstanding loan balance from
Seagate Technology on a monthly basis at the LIBOR rate plus 2% per annum. The
outstanding loan balance fluctuates depending on working capital required to
fund operations, offset by or in addition to amounts due or receivable from
Seagate Technology under a tax allocation agreement we have with Seagate
Technology. Interest income and expense fluctuate from year to year because of
fluctuations in the net outstanding loan balance during the year. The net
foreign currency exchange gain or loss represents the impact of foreign
currency fluctuations on the translation of foreign currency transactions into
U.S. dollars and varies depending upon currency exchange rates.

Income Taxes. We recorded a $0.7 million benefit from income taxes at an
effective rate of 25% for the quarter ended September 29, 2000 compared with a
$8.8 million benefit from income taxes at an effective rate of 65% for the
quarter ended October 1, 1999. The effective rate used to record the benefit
from income taxes for the quarter ended September 29, 2000 was less than the
U.S. federal statutory tax rate primarily due to non-deductible amortization.
The effective rate used to record the benefit from income taxes for the quarter
ended October 1, 1999 was greater than the U.S. federal statutory tax rate
primarily due to losses sustained in foreign jurisdictions where the foreign
tax rate exceeds the U.S. federal statutory tax rate and a decrease in the
valuation allowance for deferred tax assets for tax attributes sold to Seagate
Technology pursuant to the Tax Allocation Agreement.

Subsequent to the consummation of the transaction, Seagate Technology and
Seagate Software will no longer file federal income tax returns on a
consolidated basis. Therefore, Seagate Technology will not benefit from nor
will it reimburse Seagate Software pursuant to the Tax Allocation Agreement for
tax losses sustained by Seagate Software subsequent to consummation of the
transaction.

Fiscal Years Ended June 30, 2000, July 2, 1999 and July 3, 1998

Revenues

Total revenues decreased 11% to $126.5 million in fiscal 2000 from $141.8
million in fiscal 1999 and increased 22% in fiscal 1999 from $116.0 million in
fiscal 1998. In each year presented, a majority of our

20
<PAGE>

revenues were derived from license fees for our products. The decline in
revenues in fiscal 2000 was because of a decline in licensing revenues. We also
derive revenues from technical support, training activities, consulting
services and maintenance related to the licensing of our products. The increase
in revenues in fiscal 1999 as compared to fiscal 1998 was a result of increases
in licensing revenues and maintenance, support and services revenues.

In fiscal 2000, fiscal 1999 and fiscal 1998, revenues from a third-party
customer, Ingram, accounted for more than 10% of consolidated revenues for a
total of $25.3 million, $18.3 million and $16.8 million, respectively.

As a percentage of total revenues, our sales returns and allowances
decreased to 1% in fiscal 2000 from 1.5% in fiscal 1999 and 2% in fiscal 1998.
The decrease is primarily attributable to decreased distributor returns
reflecting the maturity of our products.

Licensing revenues. Licensing revenues decreased 19% to $74.2 million in
fiscal 2000 from $92.0 million in fiscal 1999 and increased 13% in fiscal 1999
from $81.2 million in fiscal 1998. The decline in fiscal 2000 was primarily
attributable to significant voluntary and involuntary turnover of our direct
sales force in the first half of the year. The time to hire and train new sales
personnel resulted in lower productivity of the sales force in fiscal 2000 than
prior years. This resulted in a decline in license sales of our direct sales
dependent products, such as Seagate Info and Seagate Holos. We have rebuilt our
direct sales force throughout the year to near fiscal 1999 levels and intend to
continue to invest in this area in fiscal 2001. The increase in fiscal 1999
license revenues was due primarily to increased sales of Crystal Reports and
Seagate Info and an expansion of our direct and indirect sales channels. Our
direct sales include corporate licensing and other direct sales to users while
our indirect sales include distribution and OEM sales.

Maintenance, support and services revenues. Maintenance, support and
services revenues increased 5% to $52.3 million in fiscal 2000 from $49.7
million in fiscal 1999 and increased 43% in fiscal 1999 from $34.7 million in
fiscal 1998. As a percentage of total revenues, maintenance, support and
services revenues increased to 41% of total revenues in fiscal 2000 from 35% in
fiscal 1999 and 30% of total revenues in fiscal 1998. The year-over-year
increases in maintenance, support and services revenues were attributable to
the higher cumulative installed customer base, which resulted in increased
sales of maintenance agreements and training and consulting services. We expect
revenues from maintenance, support and services to continue to grow as our
installed base of customer expands.

Revenues by geographic location were as follows:

<TABLE>
<CAPTION>
For the years ended
---------------------------------------
June 30, 2000 July 2, 1999 July 3, 1998
------------- ------------ ------------
(In thousands)
<S> <C> <C> <C>
Revenues by geography:
United States........................ $ 83,080 $ 86,945 $ 78,932
Europe............................... 28,570 38,625 25,760
Other................................ 14,868 16,187 11,260
-------- -------- --------
$126,518 $141,757 $115,952
======== ======== ========
</TABLE>

Revenues from sales in Europe and other regions outside of the United
States represented 34%, 39% and 32% of total revenues for the fiscal years
ended 2000, 1999 and 1998, respectively. Combined revenues from sales in Europe
and other regions outside of the United States declined in total by 21% to
$43.4 million in fiscal 2000 from $54.8 million in fiscal 1999 because the
turnover in our direct sales force was greater in Europe than in the United
States. Revenues from sales in Europe and other regions outside of the United
States increased by 48% in fiscal 1999 from $37.0 million in fiscal 1998
because of the expansion of our direct and indirect sales channels in Europe
and other regions outside of the United States during fiscal 1999. To date,

21
<PAGE>

seasonal reductions in business activity in the summer months in Europe and
certain other regions have not had a material impact on our operating results.

Historically, a significant portion of our revenues were denominated and
collected in Canadian Dollars, Deutsche Marks, British Pounds Sterling, French
Francs, the Australian Dollar and Japanese Yen. We expect a significant portion
of our revenues to be denominated and collected in the Euro in the future. To
date, the foreign exchange gains and losses on transactions and revenues
reported by our foreign subsidiaries have not been significant nor have any
costs related to the Euro conversion. In addition, since most of our foreign
operations conduct business in their local currency, our earnings are not
significantly impacted by fluctuations in exchange rates. Translation
adjustments from consolidation of such foreign operations are presented within
comprehensive income.

Cost of Revenues

Cost of revenues decreased 10% to $44.0 million in fiscal 2000 from $48.7
million in fiscal 1999. Cost of revenues increased 36% to $48.7 million in
fiscal 1999 from $35.8 million in fiscal 1998. As a percent of total revenues,
cost of revenues was 34% in fiscal 2000, 34% in fiscal 1999 and 31% in fiscal
1998. The absolute decrease in cost of revenues in fiscal 2000 was a result of
a $9.0 million decline in amortization and write-off of developed technologies,
offset by increased salaries and benefit expenses related to increased
technical support and professional services personnel. The increase in cost of
revenues in fiscal 1999 compared to fiscal 1998 was a result of increases in
technical support and consulting personnel to support revenues growth, and an
increase in amortization and write-off of developed technologies in fiscal
1999. Our gross margins, as a percentage of total revenues, decreased from 69%
for fiscal 1998 to 66% of total revenues for both fiscal 1999 and fiscal 2000
in response to increases in the maintenance, support and service revenues which
generally have lower margins than licensing revenues.

Cost of licensing revenues. The cost of licensing revenues decreased 3% to
$4.1 million in fiscal 2000 from $4.2 million in fiscal 1999, but increased 31%
to $4.2 million in fiscal 1999 from $3.2 million in fiscal 1998. As a percent
of licensing revenues, cost of licensing revenues increased to 6% in fiscal
2000 from 5% in fiscal 1999 and 4% in fiscal 1998. The increased cost of
licensing revenues as a percent of licensing revenues in fiscal 2000 was due in
part to a write-down of obsolete product materials. The increase in cost of
licensing revenues in absolute dollars in fiscal 1999 as compared to fiscal
1998 was due primarily to the increased volume of shipments during the year.

Cost of maintenance, support and services revenues. The cost of
maintenance, support and services revenues increased 13% to $39.7 million in
fiscal 2000 from $35.2 million in fiscal 1999 and increased 33% to $35.2
million in fiscal 1999 from $26.4 million in fiscal 1998. The increases in both
periods were primarily due to expansion of our professional services workforce
to support the growth in training and consulting revenues and an increased
number of technical support representatives. As a percent of maintenance,
support and services revenues, cost of maintenance, support and services
revenues were 76% in fiscal 2000, 71% in fiscal 1999 and 76% in fiscal 1998.
The percent increase in fiscal 2000 was because of increases in maintenance,
support and services personnel and related salaries and benefits. The percent
decrease in fiscal 1999 compared to fiscal 1998 was due to increased
maintenance, support and services revenues in fiscal 1999.

Amortization and write-off of developed technologies. Amortization and
write-off of developed technologies decreased 98% to $198,000 in fiscal 2000
from $9.2 million in fiscal 1999, but amortization and write-off of developed
technologies increased 51% to $9.2 million in fiscal 1999 from $6.1 million in
fiscal 1998. As a percent of total revenues, amortization and write-off of
developed technologies were zero in fiscal 2000, 6% in fiscal 1999 and 5% in
fiscal 1998. The decrease in the amortization and write-off of developed
technologies in fiscal 2000 was primarily attributable to intangible assets
that were fully amortized during fiscal 1999 and a $4.7 million write-off of
certain developed technologies that occurred during fiscal 1999. The increase
in the amortization and write-off of developed technologies in fiscal 1999
compared to fiscal 1998 was primarily due to the $4.7 million write-off of
certain developed technologies.

22
<PAGE>

Operating Expenses

Sales and Marketing. Sales and marketing expenses increased 1% to $66.1
million in fiscal 2000 from $65.5 million in fiscal 1999 and 29% to $65.5
million in fiscal 1999 from $50.7 million in fiscal 1998. As a percent of total
revenues, sales and marketing expenses increased to 52% in fiscal 2000 from 46%
in fiscal 1999 and 44% in fiscal 1998. The increases in sales and marketing
expenses were primarily due to the rebuilding and expansion of our sales force
and increases in marketing and promotion, including the promotion of the "free
offer" product campaign for Crystal Analysis and Seagate Info that was launched
in late fiscal 1999 and continued throughout fiscal 2000. During the "free
offer" product campaign, we provided former and potential customers,
unconditionally, a limited number of licenses for each promotional product free
of charge, with no related purchase obligations or rights for additional
products. As this campaign was strictly a marketing strategy and was not
directly or indirectly connected with revenues or products and services to be
provided to those receiving the free products, we expensed the cost of the
program as incurred.

Additionally, in fiscal 1999 these expenses included allocations from
Seagate Technology for the proportional cost of television and newspaper
advertisements. The increase in sales and marketing expenses as a percent of
revenues in fiscal 2000 was a result of the decline in productivity of the
direct sales force due to the turnover of the direct sales force. We expect
sales and marketing expenses to increase in fiscal 2001 as we continue to
expand our sales force.

Research and Development. Research and development expenses increased 17%
to $24.9 million in fiscal 2000 from $21.2 million in fiscal 1999 and 31% to
$21.2 million in fiscal 1999 from $16.2 million in fiscal 1998. As a percent of
total revenues, research and development expenses increased to 20% in fiscal
2000 from 15% in fiscal 1999 and 14% in fiscal 1998. The increases in research
and development expenses were primarily due to increases in personnel and
related expenses and occupancy costs for fiscal 2000 and fiscal 1999, partially
offset by reductions in localization and equipment expenses during fiscal 2000.

General and Administrative. General and administrative expenses increased
51% to $20.9 million in fiscal 2000 from $13.8 million in fiscal 1999 and
decreased 8% to $13.8 million in fiscal 1999 from $15.1 million in fiscal 1998.
As a percent of total revenues, general and administrative expenses increased
to 17% in fiscal 2000 from 10% in fiscal 1999 and decreased in fiscal 1999 from
13% in fiscal 1998. The increase in absolute dollars in fiscal 2000 was
primarily attributable to increases in personnel costs, increased legal and
accounting expenses associated with increased public reporting requirements
during fiscal 2000 and an increase in bad debt expenses. The increase in
absolute dollars in general and administrative in fiscal 1998 as compared to
fiscal 1999 was primarily due to a provision for a legal action against us in
fiscal 1998, partially offset by lower salaries and benefits and overhead costs
in fiscal 1998 compared to fiscal 1999.

Amortization of Goodwill and Other Intangibles. Amortization of goodwill
and other intangibles decreased 36% to $3.0 million in fiscal 2000 from $4.8
million in fiscal 1999 and increased 51% to $4.8 million in fiscal 1999 from
$3.2 million in fiscal 1998. As a percent of total revenues, amortization of
goodwill and other intangibles decreased to 2% in fiscal 2000 from 3% in each
of fiscal 1999 and fiscal 1998. The decrease in amortization of goodwill and
other intangibles in fiscal 2000 was attributable to intangible assets that
were fully amortized in fiscal 1999. The increase in the amortization of
goodwill and other intangibles in fiscal 1999 compared to fiscal 1998 was
primarily due to a write-off of the carrying value of intangibles of
$1.5 million in fiscal 1999 due to asset values that had become impaired.

Restructuring Costs. Restructuring charges were $1.3 million in fiscal
2000, representing 1% of total revenues. The charges resulted from a company-
wide restructuring plan announced in October 1999 to realign resources to
better manage and control our business. The charges were comprised of severance
and benefits paid to approximately 125 employees from various locations and
departments, including direct sales force personnel, who were terminated on
October 23, 1999. The decline in our direct sales force as part of this
restructuring contributed to the decline in revenues during fiscal 2000
compared to fiscal 1999. The restructuring charges were paid during fiscal 2000
and no amounts were outstanding as of June 30, 2000. We

23
<PAGE>

believe there are no further restructuring liabilities related to this plan. In
addition, we believe that the future benefit of this plan, while not
quantifiable, is a more focused and productive company. Any benefits in the
form of cost reductions because of reduced salaries cost have been realized
during the year and are not expected to continue.

Unusual Items. Unusual items represented the compensation expense and
associated expenses attributable to our employees related to the June 1999
Seagate Technology Exchange Offer and the October 1999 Seagate Technology
Exchange of Shares. As a percent of total revenues, unusual items increased to
192% in fiscal 2000 from 61% in fiscal 1999 and zero in fiscal 1998. Unusual
items in fiscal 2000 were a result of the October 1999 Seagate Technology
Exchange of Shares. In connection with the merger of Seagate Daylight Merger
Corp., with and into Seagate Software Holdings, Seagate Software Holdings
minority stockholders and optionees received payment in the form of 3.23 shares
of Seagate Technology common stock per share of Seagate Software Holdings
common stock, less any amounts due for the payment of the exercise price of
unexercised options. Seagate Technology accounted for the exchange of shares of
its common stock for stock options in Seagate Software Holdings held by
employees and stock held and vested by employees less than six months as the
settlement of an earlier stock award. Seagate Technology recorded compensation
expense of $283.6 million, plus $2.1 million of employer portion of payroll
taxes, related to the purchase of minority interest in Seagate Software
Holdings. Of the $283.6 million of compensation expense, $239.6 million of
compensation expense was allocated to us on the basis of employees specifically
identified with our business and for those employees that performed services
for us, on the basis of time estimates. In addition, the $2.1 million of the
employer portion of payroll taxes paid related to our employees and therefore
was recorded as an expense. We also incurred legal and accounting costs of
$877,000 with respect to this transaction.

Unusual items in fiscal 1999 were a result of the June 1999 Seagate
Technology Exchange Offer. Seagate Technology exchanged shares of its common
stock for shares of Seagate Software Holdings common stock owned by employees,
directors and consultants of Seagate Software Holdings and its parent and
subsidiaries. For those shares outstanding and vested less than six months,
Seagate Software Holdings recorded compensation expense of $102.5 million equal
to the fair value of the shares purchased less the original purchase price paid
by the employees, plus $630,000 of employer portion of payroll taxes. Of the
$102.5 million of compensation expense, Seagate Software Holdings allocated
$77.5 million of compensation expense to us on the basis of employees
specifically identified with our business and for those employees that
performed services for us, on the basis of time estimates. In addition, the
$630,000 of employer portion of payroll taxes paid, related to our employees
and therefore was recorded as an expense. We also expensed the $8.6 million of
compensation expense for the purchase of unvested stock options related to
certain of our continuing employees.

We established new non-compensatory stock option plans in fiscal 2000 for
participation by our employees, directors and consultants. We did not record
any compensation expense under these plans in fiscal 2000.

Interest and other, net. Interest and other, net consists of interest
income, interest expense and net foreign currency exchange gain. Interest and
other, net decreased 64% to $20,000 in fiscal 2000 from $56,000 in fiscal 1999
and decreased 90% to $56,000 in fiscal 1999 from $534,000 in fiscal 1998.
Interest and other, net fluctuates on a year-to year basis depending on
fluctuations in the LIBOR interest rate, our net outstanding loan balance with
Seagate Technology and foreign currency exchange rates. Interest is computed on
the outstanding loan balance from Seagate Technology on a monthly basis at the
LIBOR rate plus 2% per annum. The outstanding loan balance fluctuates depending
on working capital required to fund operations, offset by or in addition to
amounts due or receivable from Seagate Technology under a tax allocation
agreement we have with Seagate Technology. Interest income and expense
fluctuate from year to year because of fluctuations in the net outstanding loan
balance during the year. The net foreign currency exchange gain or loss
represents the impact of foreign currency fluctuations on the translation of
foreign currency transactions into U.S. dollars and varies depending upon
currency exchange rates.

Income Taxes. We recorded a $55.1 million benefit from income taxes at an
effective rate of 20% in fiscal 2000 compared with a $2.5 million benefit from
income taxes at an effective rate of 3% in fiscal 1999,

24
<PAGE>

and with an $8.8 million provision for income taxes at an effective rate of
197% in fiscal 1998. The effective rate used to record the benefit from income
taxes in fiscal 2000 was less than the U.S. federal statutory tax rate
primarily due to non-deductible compensation expense for certain employees
related to the October 1999 Seagate Technology Exchange of Shares and foreign
tax rates that were in excess of the U.S. federal statutory tax rate. The
effective rate used to record the benefit from income taxes in fiscal 1999 was
less than the U.S. federal statutory tax rate primarily due to non-deductible
compensation expense for certain employees associated with the June 1999
Seagate Technology Exchange Offer and increases in the valuation allowance for
deferred tax assets. The effective rate used to record the provision for income
taxes in fiscal 1998 was greater than the U.S. federal statutory tax rate
primarily due to increases in the valuation allowance for deferred tax assets
and foreign tax rates that were in excess of the U.S. federal statutory tax
rate.

Selected Quarterly Financial Data (Unaudited)

The table below shows our unaudited quarterly statements of operations data
for each of the nine quarters ended September 29, 2000. This information has
been derived from our unaudited consolidated and combined financial statements,
which, in management's opinion, have been prepared on the same basis as the
audited consolidated and combined financial statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of the operating results
for any future period.

For the 13 Weeks Ended (in thousands, except share and per share data)

<TABLE>
<CAPTION>
Sept. 29, June 30, Mar. 31, Dec. 31, Oct. 1, July 2, April 2, Jan. 1, Oct. 2,
2000 2000 2000 1999 1999 1999 1999 1999 1998
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues.... $ 36,904 $ 33,956 $ 34,387 $ 30,298 $ 27,877 $ 41,779 $ 38,869 $ 33,517 $ 27,592
Gross Profit.... $ 25,804 $ 23,012 $ 23,867 $ 19,353 $ 16,311 $ 26,623 $ 26,363 $ 22,870 $ 17,200
Net Loss........ $ (2,179) $ (2,173) $ (1,103) $ (213,234) $ (4,652) $ (87,541) $ (2,296) $ (354) $ (6,184)
Net Loss per
share--basic
and diluted... $ (0.03) $ (0.03) $ (0.01) $ (2.84) $ (0.06) $ (1.17) $ (0.03) $ (0.00) $ (0.08)
Weighted average
number of
shares........ 75,073,753 75,002,050 75,001,537 75,001,000 75,001,000 75,001,000 75,001,000 75,001,000 75,001,000
</TABLE>

Net Revenues

Following a decrease in the first quarter of fiscal 2000, our quarterly
revenues increased gradually throughout fiscal year 2000 and the first quarter
of fiscal 2001 because of the steady growth in the direct sales force during
the year and the introduction of our Crystal Reports 8 product in February
2000.

The decrease in our net revenues from $41.8 million in the quarter ended
July 2, 1999 to $27.9 million in the quarter ended October 1, 1999 is primarily
attributable to turnover in our direct sales force and some management
positions in the first quarter of fiscal 2000.

25
<PAGE>

Our quarterly revenues increased from quarter to quarter during fiscal
1999. The increase is primarily attributable to the introduction of our Crystal
Reports 7 product in November 1998 and our Seagate Info 7 product in December
1998.

Gross Profit

Following a decrease in our gross profit in the first quarter of fiscal
2000 compared to the fourth quarter of fiscal 1999, our gross profit steadily
increased during fiscal 2000 and the first quarter of fiscal 2001.

The decrease in our gross profit from $26.6 million for the quarter ended
July 2, 1999 to $16.3 million for the quarter ended October 1, 1999 is
attributable to the decrease in our net revenues. Our cost of revenues did not
decrease proportionally reflecting a minimum level of personnel and related
costs for technical support and service staff throughout the year.

Our gross profit per quarter increased throughout fiscal 1999 as a result
of the growth in net revenues during the period. The decrease in our gross
profit as a percentage of revenues from 68% in the third quarter of fiscal 1999
to 64% in the fourth quarter of 1999 is primarily attributable to the write-off
of certain developed technologies during the period.

Gross profit also fluctuates quarterly based on changes in product mix.

Net Loss

Our net loss improved in the last two quarters of fiscal 2000 compared to
the first two quarters of fiscal 1999. The improvement is because we were able
to control and maintain our costs, while growing our revenues.

In addition, during the quarter ended December 31, 1999 we recorded an
unusual expense of $242.2 million. This unusual expense represented the
compensation expense and associated expenses attributable to our employees
related to the October 1999 Seagate Technology Exchange of Shares. In
connection with the merger of Seagate Daylight Merger Corp., with and into
Seagate Software Holdings, Seagate Software Holdings minority shareholders and
optionees received payment in the form of 3.23 shares of Seagate Technology
common stock per share of Seagate Software Holdings common stock, less any
amounts due for the payment of the exercise price of unexercised options.
Seagate Technology accounted for the exchange of shares of its common stock for
stock options in Seagate Software Holdings held by employees and stock held and
vested by employees less than six months as the settlement of an earlier stock
award. Seagate Technology recorded compensation expense of $283.6 million, plus
$2.1 million of employer portion of payroll taxes, related to the purchase of
minority interest in Seagate Software Holdings. Of the $283.6 million of
compensation expense, $239.6 million was allocated to us on the basis of
employees specifically identified with our business and for those employees
that performed services for us, on the basis of time estimates. In addition,
the $2.1 million of the employer portion of payroll taxes paid related to our
employees and therefore was recorded as an expense. During this quarter, we
also incurred $0.5 million of legal and accounting costs with respect to this
transaction.

This unusual item expense was partially offset by $39.8 million of tax
benefits for the quarter at an effective rate of 16%. This effective rate was
less than the U.S. Federal statutory tax rate primarily due to non-deductible
compensation expense for certain employees related to the October 1999 Seagate
Technology Exchange of Shares.

During fiscal 1999, our net loss fluctuated on a quarter over quarter basis
because of the improvement in our gross profit over the four quarters; an
unusual item expense of $86.7 million recorded during the quarter ended July 2,
1999; and, an increase in marketing expenses during the quarter ended July 2,
1999 with respect to the "free offer" campaign described above.

26
<PAGE>

The unusual item expense of $86.7 million in the quarter ended July 2, 1999
is attributable to the June 1999 Seagate Technology Exchange Offer. On June 9,
1999, Seagate Technology exchanged 5,275,772 shares of its common stock for
3,267,255 shares of Seagate Holdings common stock owned by employees, directors
and consultants of Seagate Software Holdings and its parent and subsidiaries.
For those shares outstanding and vested less than six months, we recorded
compensation expense of $77.5 million plus $0.6 million of employer portion of
payroll taxes paid. We also expensed $8.6 million of compensation expense for
the purchase of unvested stock options related to certain of our continuing
employees.

This unusual item expense was partially offset by $4.3 million of tax
benefits for the quarter at an effective rate of 5%. This effective rate was
less than the U.S. Federal statutory tax rate primarily due to non-deductible
compensation expense for certain employees related to the June 1999 Seagate
Technology Exchange Offer.

The net loss for the quarter ended July 2, 1999 also included marketing
costs with respect to the "free offer" product campaign described above.

Our operating results have varied significantly from quarter to quarter in
the past and may continue to fluctuate in the future. The quarterly
fluctuations are caused by a number of factors, including demand for our
products and services, size and timing of specific sales, level of product and
price competition, timing and market acceptance of new product introductions
and product enhancements by us and our competitors, the length of our sales
cycle, personnel changes, budgeting cycles of our customers, changes in
technology and changes caused by the rapidly evolving market for business
intelligence products. Many of these factors are beyond our control. Therefore,
we believe that results of operations for interim periods should not be relied
upon as any indication of the results to be expected or achieved in any future
period.

Liquidity and Capital Resources

Seagate Technology, as part of a general services agreement, provides cash
management services to us. We maintain some other cash balances for our foreign
operations. Year-end and quarter-end cash balances represent both U.S. dollar
and foreign currency deposits, primarily Canadian Dollars, British Pounds
Sterling, Japanese Yen and currencies tied to the Euro. Our cash is maintained
in highly liquid operating accounts and primarily consists of bank deposits.
Our total cash balances were $3.6 million and $7.4 million as of June 30, 2000
and July 2, 1999, respectively; and $4.5 million as of September 29, 2000.

To date our operations have been financed by borrowings from Seagate
Technology. These borrowings were available to us under a revolving loan
agreement with Seagate Technology which was renewed in July 2000 with Seagate
Technology LLC. The revolving loan agreement provides for maximum outstanding
borrowings of up to $60.0 million and expires on July 4, 2001. Beginning in
fiscal 1999, we paid or earned interest at the LIBOR rate plus 2% per annum on
borrowings or amounts receivable. Prior to fiscal 1999, we paid interest at 6%
per annum. In connection with the SAC Transaction, a wholly owned subsidiary of
SAC, Seagate Technology LLC, assumed our revolving loan agreement in July 2000.

Net cash used in operating activities was $21.6 million in fiscal 2000 and
$909,000 in fiscal 1999. Net cash provided by operating activities was $924,000
for the quarter ended September 29, 2000. The cash used in operating activities
in fiscal 2000 was primarily attributable to the $66.2 million increase in
income taxes receivable from Seagate Technology under a tax allocation
agreement and a $13.3 million decrease in accrued employee compensation, offset
by a $24.2 million decline in accounts receivable and cash operating income of
$28.4 million. The increase in income taxes receivable from Seagate Technology
was attributable to our tax losses utilized by Seagate Technology during fiscal
2000, relating to the fiscal 2000 tax benefit and prior years losses. The
decline in accrued employee compensation was primarily attributable to the
payment in fiscal 2000

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of the $8.6 million compensation expense related to the June 1999 Seagate
Technology Exchange Offer. The decline in accounts receivable balance was the
result of a concerted effort to reduce days sales outstanding in fiscal 2000 as
compared to prior years. As of June 30, 2000, accounts receivable represented
13% of total revenues as compared with 30% of total revenues as of July 2,
1999. Net cash used in operating activities in fiscal 1999 was primarily
attributable to a $15.6 million increase in income tax receivable and offset by
a $13.1 million increase in accrued employee compensation. The increase in
accrued employee compensation was primarily attributable to the $8.6 million
compensation expense accrued for in fiscal 1999 related to the June 1999
Seagate Technology Exchange Offer.

Net cash used in investing activities was $6.4 million in fiscal 2000 and
$4.9 million in fiscal 1999. Net cash used in investing activities was $1.1
million for the quarter ended September 29, 2000. Net cash used in investing
activities was primarily for new office facilities, leasehold improvements, and
purchases of computers, furniture and office equipment to support our
expansion. In fiscal 2001, we intend to invest approximately $15.0 million in
capital assets. These anticipated capital expenditures include leasehold
improvements for a new 129,000 square foot facility in Vancouver, Canada,
leasehold improvements in other office locations, and improvements to financial
information and business systems and related computer equipment. Additionally,
product development activities may include cash to acquire technology.

Net cash provided by financing activities was $24.1 million in fiscal 2000
and $3.0 million in fiscal 1999. Net cash provided by financing activities was
$1.3 million for the quarter ended September 29, 2000. The net cash provided by
financing activities were attributable to amounts borrowed and repaid under the
revolving loan agreement with Seagate Technology to fund working capital and
operating activities. The revolving loan balance was offset by amounts due from
or payable to Seagate Technology under the tax allocation agreement. The net
revolving loan balance as of September 29, 2000 was a receivable balance of
$25.3 million, compared to a receivable balance of $25.7 million at the end of
fiscal 2000. The net revolving loan balance decreased $42.2 million during
fiscal 2000 to a net receivable of $25.7 million at the end of fiscal 2000 from
a loan payable to Seagate Technology of $16.5 million at the end of fiscal
1999. The decrease in the loan balance was primarily attributable to the $66.2
million increase in income taxes receivable from Seagate Technology, offset by
amounts borrowed to fund cash operating losses during fiscal 2000.

We believe our current cash balances, available borrowings from Seagate
Technology, SAC or its subsidiaries and cash flows generated from our
operations will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months.We may require
additional financing through the end of fiscal 2002. We are in the process of
negotiating additional financing with Seagate Technology LLC through the end of
fiscal 2002. Should additional financing not be available from Seagate
Technology LLC at terms that are satisfactory to us and Seagate Technology LLC,
we may seek additional equity and financing from other sources.

New Accounting Pronouncements

In June 1998, FASB issued Statement of Financial Accounting Standards No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities", and its amendments Statements 137 and 138, in June 1999 and June
2000, respectively. These Statements establish accounting and reporting
standards for derivative instruments and for hedging activities. The Statements
require that derivatives be recognized in the balance sheet at fair value and
specifies the accounting for changes in fair value. We adopted SFAS 133, 137
and 138 on July 1, 2000. There was no impact of this adoption on our
consolidated and combined results of operations, financial position and cash
flows.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements", which was amended by SAB 101A and SAB 101B in March 2000 and June
2000, respectively. SAB 101 provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the SEC. All
registrants are expected to apply the accounting and disclosures described in
SAB 101. We are required to adopt SAB 101 in the fourth quarter of

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fiscal 2001. We are still assessing the impact of SAB 101 on our consolidated
and combined results of operations, financial position and cash flows.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, ("FIN 44"). "Accounting for Certain Transactions
Involving Stock Compensation--an Interpretation of APB Opinion No. 25". FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues,
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to
the terms of the previously fixed stock options or awards; and the accounting
for an exchange of stock compensation awards in a business combination. We
adopted FIN 44 on July 1, 2000. There was no impact of this adoption on our
consolidated and combined results of operations, financial position and cash
flows.

Factors Affecting Future Operating Results

You should be alerted that the following risks and uncertainties could
affect and in some instances in the past have affected our actual results and
could cause our results for future periods to differ materially. Additional
risks and uncertainties that we are unaware of or that we currently deem
immaterial also may become important factors that may adversely affect our
results of operations, financial condition or business.

Risks Associated with the SAC Transaction

As a consequence of the SAC Transaction, our business could be harmed
because:

. our earnings will be impacted because our operating results will
reflect the fees, costs and expenses we incurred in connection with the
transaction, such as legal, accounting and financial advisor fees,
costs and expenses;

. we will not receive any future benefits from our current intercompany
tax allocation agreement, under which we received substantial cash
payments, in the form of an offset to our loan under the revolving loan
agreement, from Seagate Technology for our income tax losses utilized
by Seagate Technology relative to our tax loss position;

. we were required to pledge a majority of our assets to guarantee the
debt obligation used to finance the SAC Transaction, which could impair
our ability to raise additional capital or debt;

. we may not continue to receive certain administrative services and
support from Seagate Technology after the expiration of our general
services agreement if Seagate Technology does not renew it, which may
result in additional charges or expenses to contract or perform these
services ourselves;

. we may not continue to have access to the same level of administrative
services and support from Seagate Technology LLC after the SAC
Transaction due to the more limited resources of Seagate Technology,
which may be a result of the burden of servicing the debt used to
finance the SAC Transaction, and we may incur additional changes or
expenses to provide these services internally or obtain them from a
third party;

. we may not be able to continue to use the Seagate name and trademark,
which could harm customers' recognition of our brand; and

. we may be required to record some portion of the increase in fair value
of assets recorded in the SAC Transaction on our balance sheet in
accordance with pushdown accounting, which would cause our results of
operations to decline as we amortize the amounts we are allocated.

We Remain Liable to Third Parties after the SAC Transaction and the Merger

In the SAC Transaction, Seagate Technology sold all of its operating assets
(including us) to SAC, and we and SAC have agreed to assume and indemnify
VERITAS for substantially all liabilities arising in connection

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<PAGE>

with our operating assets. As a result, we continue to face possible
liabilities for actions, events or circumstances arising or occurring both
before and after the SAC Transaction and the Merger. Some areas of potential
liability include:

. tax liabilities;

. obligations under federal, state and foreign pension and retirement
benefit laws; and

. existing and future litigation.

As a result of our obligations to indemnify VERITAS, we could experience a
material adverse effect on our business and financial performance.

As a result of the SAC Transaction, the composition of our board of directors
and the direction of our business may change.

Upon the closing of the SAC Transaction in November 2000, our company
became a majority owned subsidiary of Seagate Software (Cayman) Holdings, a
wholly owned subsidiary of SAC. As a result of the change in ownership, SAC
controls more than 85% of our common stock on a fully diluted basis and can
effectively replace the members of our board of directors. Although SAC has not
taken such action to date, it may do so in the future. In addition, as our
majority stockholder and through its influence on our board of directors, SAC
has the ability to change the direction of our business, our operating budget
and possible acquisition or sales of our company.

Risks from Potential Fluctuations in Annual and/or Quarterly Operating
Results

We often experience a high volume of sales at the end of our quarter.
Therefore, it may be late in the quarter before we are able to determine that
our costs are too high in relation to our actual sales. If this were to happen,
we would not be able to reduce these costs and, consequently, we may experience
a net loss or our net income may be reduced. In addition, our operating results
have been and, in the future, may be subject to significant quarterly
fluctuations as a result of a number of other factors including:

. the size and timing of orders from and shipment of products to major
customers;

. our ability to develop, introduce and market new products and product
enhancements in a timely fashion;

. market acceptance of and demand for business intelligence and
enterprise reporting software, generally, and our products in
particular;

. the length of our sales cycles;

. personnel changes;

. our success in expanding our direct sales force and increasing our
indirect distribution;

. changes in the prices of our products and our competitors' products;

. the mix of products and services of our customer orders, which can
affect the timing of our revenue recognition;

. the amount of customization required for our customer orders, which can
affect the timing of our revenue recognition;

. our customers' preference for competing technologies in lieu of our
products;

. our inability to reduce our costs in relation to our revenues, because
we ship our products shortly after we receive orders, and we operate
with no backlog;

. the impact of changes in foreign currency exchange rates on the cost of
our products and the effective price of such products to foreign
consumers;

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. changes in our operating expense;

. competition and consolidation in our industry;

. the timing of new product releases; and

. seasonal factors, such as our typically lower pace of sales in our
first fiscal quarter.

Risks of Revenue Concentration

Our new products must be accepted by customers in order for us to be
successful. If potential customers do not purchase our products as a result of
competition, technological change or other factors, then our business,
operating results and financial condition would be materially adversely
affected.

Our software products have a fixed life cycle that is difficult to
estimate. If we do not develop and introduce new products before our existing
products have completed their life cycles, then we will be unable to sustain or
increase our level of sales. We cannot be sure that we will continue to be
successful in marketing our key products or any new products, applications or
product enhancements.

We currently obtain most of our revenue from a limited number of software
products and anticipate this to be the case in the foreseeable future. Sales to
a small number of customers generate a disproportionate amount of our revenues.
For example, we derived 20% of our revenue from sales to Ingram in fiscal 2000.
If Ingram, or any other significant customer, reduces its purchases from us,
our business, financial condition and results of operations would be materially
adversely affected unless we substantially increase sales to other customers.
Because our contracts with Ingram and other customers do not require them to
purchase any specified number of software licenses from us, we cannot be sure
that our significant customers will continue to purchase our products at their
current levels.

Risks Associated with Long Sales Cycle

To date, our customers have typically invested substantial time, money and
other resources and involved many people in the decision to license our
software products, including proprietary Seagate Info and Seagate Holos. As a
result, we may wait six to nine months after the first contact with a customer
for that customer to place an order while they seek internal approval for the
purchase of our products. During this long sales cycle, events may occur that
affect the size, timing or even completion of the order. For example, the
customer's budget and purchasing priorities may change, or new competing
technology may enter the marketplace. We may lose sales or experience reduced
sales as the result of this long sales cycle, which would reduce our revenues.

Risks Associated with Relying on Sales Staff, Channel Partners and Strategic
Relationships

We sell and support our products through:

. sales staff;

. third party distributors; and

. OEMs.

We also have a strategic relationship with Microsoft that enables us to
bundle our products with Microsoft's products, and we have developed and are
developing certain utilities and products to be a part of Microsoft's products.
If Microsoft reduces the nature and extent of its relationship with us, our
business, operating results and financial condition would be materially
adversely affected.

We have made significant expenditures in recent years to expand our sales
and marketing force. Our future success will depend in part upon the
productivity of our sales and marketing force. We believe that our ability to
continue to attract, integrate, train, motivate and retain new sales and
marketing personnel will also

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affect our success. We face intense competition for sales and marketing
personnel in the software industry, and we cannot be sure that we will be
successful in hiring and retaining such personnel in accordance with our plans.
Even if we hire and train sufficient numbers of sales and marketing personnel,
we cannot be sure that our recent and other planned expenses will generate
enough additional revenue to exceed these costs.

We generate a substantial portion of our revenue by selling our products to
distributors and OEMs. Our distributors and OEMs decide whether or not to
include our products with those they sell and generally can carry and sell
product lines that are competitive with ours. Because OEMs and distributors
carry other product lines and are not required to make a specified level of
purchases from us, we cannot be sure that they will prioritize selling our
products. These distributors are also generally entitled to terminate their
relationship with us without cause. Our business, financial results and
operating condition would be materially adversely affected if some or all of
our current distributors and OEMs discontinued selling our products and we
failed to find comparable replacements.

New Product Development and Technological Change

Our products are used in combination with other software. Our future
success depends on our ability to continue to support a number of popular
operating systems and databases. The emergence of new industry standards in
related fields may adversely affect the demand for our existing products. This
could happen, for example, if new web standards and technologies emerged that
were incompatible with customer deployments of our applications. Our
applications run primarily on the Microsoft operating systems. Therefore, our
ability to increase sales currently depends on the continued acceptance of the
Microsoft's operating system products. We cannot market our current business
intelligence applications to potential customers who use Unix operating systems
as their application server. We would have to invest substantial resources to
develop a Unix product and we cannot be sure that we could introduce such a
product on a timely or cost effective basis, if at all.

Business intelligence applications are inherently complex, and it can take
a long time to develop and test major new products and product enhancements. In
addition, customers may delay their purchasing decisions because they
anticipate that new or enhanced versions of our products will soon become
available. We cannot be sure that we will succeed in developing and marketing,
on a timely and cost-effective basis, product enhancements or new products that
respond to technological change, introductions of new competitive products or
customer requirements, nor can we be sure that our new products and product
enhancements will achieve market acceptance.

The markets for our products are characterized by rapidly changing
technology, changing customer needs, evolving industry standards and frequent
new product introductions and enhancements. Our future success therefore will
depend on our ability to design, develop, test and support new software
products and enhancements on a timely and cost effective basis.

If we do not respond to changing market conditions, emerging industry
standards and changing customer requirements by developing and introducing new
products in a timely manner, then our business, operating results or financial
condition could be materially adversely affected.

Competition

The business intelligence software industry is characterized by rapidly
changing technology and evolving standards and is intensely competitive.
Competition could harm our ability to sell products and services which may lead
to lower prices for our products, reduced gross margins and reduced revenue. In
addition, some of our competitors may be more successful than we are in
attracting and retaining customers. Some of our competitors have been in
business longer than we have and have significantly greater financial,
technical, sales and marketing resources and greater name recognition than we
do. We expect additional competition from other established and/or emerging
companies as a result of future software industry consolidations. Current or
future competitors may make strategic acquisitions or establish strategic
partnerships, increasing the ability of their

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products to address the needs of our customers. We expect that our competitors
will offer new and existing products at lower prices, if necessary, to gain or
retain market share and customers. We have experienced and expect to continue
to experience intense competition from a number of domestic and foreign
companies. Increased competition can be expected to cause price reductions and
reduce gross margins and loss of market share, any of which could have a
material adverse effect on our business, operating results or financial
condition.

The market for business intelligence software tools and services is
characterized by rapid technological advances, ever changing customer
requirements and frequent new product and service introductions and
enhancements and evolving industry needs. Current and potential competitors may
be able to respond more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the development,
promotion, sale and support of their products than we are able to do. Our
competitors may announce new products services, or enhancements that better
meet the needs of customer requirements or changing industry standards.

We also face indirect competition from present and potential customers,
including Microsoft or other strategic partners, that continuously evaluate
whether to develop their own software products and components internally or
obtain them from outside sources. If our strategic partners decide to develop
the utilities and other products that we have provided in the past, it could
have a material adverse effect on our business, results of operations and
financial condition.

There can be no assurance that we will be able to compete successfully
against current or future competitors. If we fail to compete successfully, our
business, operating results and financial condition may be materially adversely
affected.

If we make acquisitions in the future, acquisition related accounting
charges may delay and reduce our efforts to reach profitability.

We intend to expand through internal growth as well as acquisitions.
Acquisitions involve numerous risks including:

. the difficulties of integrating the operations and products of the
acquired businesses;

. the potential disruption of our ongoing business and the distraction of
management;

. unanticipated expenses related to technology integration;

. risk of entering a market where we have limited or no prior experience;
and

. the potential loss of key employees or customers of the acquired
company.

We expect that we will continue to incur substantial expenses as we acquire
other businesses including charges for the write-off of in-process research and
development. Our operating results have fluctuated in the past and may
fluctuate in the future because of the timing of such write-offs. We may not be
successful in addressing these risks or any other problems encountered in
connection with such acquisitions.

Risks of Systems Failures

Our operations are dependent on our ability to protect our computer
equipment and the information stored in our databases from damage by
catastrophic events such as fire, natural disaster, power loss,
telecommunications failures and unauthorized intrusion. We believe that we have
taken prudent measures to reduce the risk of interruption in our operations.
However, we cannot be sure that these measures are sufficient. Any damage or
failure that causes interruptions in our operations could have a material
adverse effect on our business, results of operations and financial condition.
For example, although we maintain business insurance, our operations may be
subject to some disruption that is not covered under our policies or the dollar
amount of the damages may exceed the applicable coverage limits.

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Risks from International Operations

We have significant international operations including development
facilities, sales personnel and customer support operations. We derived 34% and
29% of our total revenue from sales outside of the United States in fiscal 2000
and the quarter ended September 29, 2000, respectively. Our offshore operations
are subject to certain inherent risks including:

. fluctuations in currency exchange rates;

. import and export restrictions, as well as tariffs;

. lack of acceptance of localized products;

. longer payment cycles for sales in certain foreign countries;

. difficulties in staffing and managing international operations;

. seasonal reductions in business activity in the summer months in Europe
and certain other countries;

. increases in tariffs, duties, price controls, other restrictions on
foreign currencies or trade barriers imposed by foreign countries;

. potentially adverse tax consequences;

. management of an enterprise spread over various countries;

. the burden of complying with a wide variety of foreign laws; and

. political unrest, particularly in areas in which we have facilities.

These factors could have a material adverse effect on our business,
operating results and financial condition in the future. In addition, we intend
to continue to invest resources to expand our sales and support operations into
strategic international locations. If the international revenues generated by
these expanded operations are not adequate to offset the expense of
establishing these foreign operations then our business, operating results and
financial condition could be materially harmed.

Our products are generally priced in U.S. dollars even when sold to
customers who are located outside of the United States. Currency instability in
foreign financial markets may make our products more expensive than products
sold by other manufacturers that are priced in one of the effected currencies.
Therefore, foreign customers may reduce purchases of our products.

Risks from Conversion to Euro

On January 1, 1999, certain member states of the European Economic
Community fixed their respective currencies to a new currency, the Euro. On
that day the Euro became a functional legal currency within these countries.
Until December 31, 2001, business in these countries will be conducted both in
the existing national currency, such as the French Franc or the Deutsche Mark,
as well as the Euro. Companies operating in or conducting business in these
countries will need to ensure that their financial and other software systems
are capable of processing transactions and properly handling the existing
currencies and the Euro.

We are implementing updates to our internal systems to address conversion
to the Euro. To date, we have not conducted any significant sales or paid any
significant expenses in the Euro. However, we expect to begin to do so in 2001.
We do not presently expect that introduction and use of the Euro will
materially affect our foreign exchange activities or will result in any
material increase in our costs. While we will continue to evaluate the impact
of the Euro introduction over time, based on currently available information,
we do not believe that the introduction of the Euro will have a material
adverse impact on our financial condition or overall trends in results of
operations, nor have the introduction and use of the Euro had such effects to
date.

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Dependence on Proprietary Technology

Our success is heavily dependent on our proprietary technology. We rely
primarily on the following to protect our proprietary rights:

. patents;

. copyrights;

. trademarks and trade secret rights;

. state and common law trade secret laws;

. confidentiality procedures;

. employee and third party nondisclosure agreements; and

. licensing restrictions.

Such efforts provide only limited protection. We also rely in part on
shrink-wrap licenses that are not signed by end users and, therefore, may be
unenforceable under the laws of certain jurisdictions.

Even though we take these steps, we have only limited protection for our
proprietary rights in our software, which makes it difficult to prevent third
parties from infringing upon our rights. Someone may be able to copy or
otherwise obtain and use our products and technology without authorization.
Policing unauthorized use of our products is difficult. Although we cannot
determine the extent of existing piracy of our products, we expect that
software piracy will be a persistent problem. Third parties may also develop
similar technology independently. We believe that effective protection of
intellectual property rights is unavailable or limited in certain foreign
countries. In addition, the laws of many countries do not protect our
proprietary rights to as great an extent as the United States.

Our competitors may successfully challenge the validity or scope of our
patents, copyrights and trademarks. We cannot be sure that our patents,
copyrights and trademarks will provide us with a competitive advantage or that
our competitors will not design around any patents issued to us. We are not
aware that any of our products infringe upon the proprietary rights of third
parties, but, in the future, third parties may claim that our current or future
products infringe that party's rights. We believe that software product
developers will be increasingly subject to claims of infringement as the
functionality of products in our industry segment overlaps. If we were subject
to a claim of infringement, regardless of our merit, such claim would have the
following impacts on us that could have a material adverse effect on our
business, operating results or financial condition in the following ways:

. require costly litigation to resolve;

. absorb significant management time;

. require us to enter into unfavorable royalty or license agreements;

. require us to cease selling our products;

. require us to indemnify our customers; or

. require us to expend additional development resources to redesign our
products.

Government Regulation may Impact Our Business

Due to increasing use of the internet and the dramatically increased access
to personal information, the U.S. federal and various state and foreign
governments have recently proposed increased limitations on the collection and
use of personal information of users of the internet and other public data
networks.

Although we attempt to obtain permission from users prior to collecting or
processing their personal data, new laws or regulations governing personal
privacy may change the ways in which we and our customers and

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affiliates may gather this personal information. In addition, in Europe, the
European Union Directive on Data Protection, a comprehensive administrative and
regulatory program, currently limits the ability of companies to collect, store
and exchange personal data with other entities.

Our growing business, eBusiness and our marketing strategy depend upon our
receiving personal information about subscribers. Privacy concerns may cause
some potential subscribers to forego subscribing to our service. If new laws or
regulations prohibit us from using information in the ways that we currently
do, or if users opt out of making their personal preferences and information
available to us and our affiliates, this could have a material adverse effect
on our business, operating results and financial condition. If personal
information is misused by us, our legal liability may be increased and our
growth may be limited.

Our success depends on increased use of the internet for eCommerce and
other commercial and personal activities. Consumers and businesses may choose
not to use the internet for a number of reasons, including:

. internet access costs;

. inconsistent service quality;

. unavailability of cost-effective, high-speed service;

. perceived security risks, such as a lack of confidence in encryption
technology; and

. privacy concerns.

In addition, governmental agencies and legislators may generate new laws
and regulations covering issues such as obscenity, freedom of expression,
pricing, content and quality of products and services, copyright and other
intellectual property issues and taxation. Such legislation or rule making
could dampen the growth in internet use generally and decrease the acceptance
of the internet as a commercial medium. If use of the internet decreases, some
of our customers may purchase fewer licenses for our software products and our
operating results would be harmed.

Software Product Errors or Defects

Software products as complex as those we offer frequently contain
undetected errors, defects, failures or viruses especially when first
introduced or when new versions or enhancements are released or are configured
to individual customer systems. Despite product testing, our products may
contain undetected defects, errors or viruses. If our products have errors,
they could:

. cause a negative customer reaction that could reduce future sales;

. generate negative publicity regarding us and our products;

. harm our reputation;

. reduce or limit customers' adoption of our products;

. require us to incur additional service and warranty costs;

. require us to make extensive changes to the product;

. require us to divert additional development resources; or

. result in customers' delaying their purchase until the errors or
defects have been remedied, which would cause our revenues to be
reduced or delayed.

Any of these occurrences could have a material adverse effect upon our
business, operating results or financial condition.

Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. Existing
or future federal, state or local laws or ordinances or unfavorable

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judicial decisions may make these provisions ineffective. Because our products
are used in system management, resource optimization and business intelligence
applications, our liability could be substantial if we receive an unfavorable
judgement. In addition, our insurance against product liability risks may not
be adequate to cover a potential claim. These factors could have a material
adverse effect upon our business, operating results or financial condition.

Dependence on Key Personnel

Our future performance depends to a significant degree upon the continued
service of our key members of management including particularly our President
and Chief Executive Officer, Gregory B. Kerfoot, and our Chief Financial
Officer, Eric Patel, as well as other of our marketing, sales and product
development personnel. We do not maintain key man insurance on any of our
officers or key employees. None of our officers or key employees is bound by an
employment agreement for any specific term. The loss of one or more of our key
personnel would have a material adverse effect on our business, operating
results and financial condition. We believe our future success will also depend
in large part upon our ability to attract, train and retain highly skilled
management, marketing, sales and product development personnel. We have
experienced intense competition for such personnel and there can be no
assurance that we will be able to retain our key employees or that we will be
successful in attracting, assimilating and retaining them in the future. As
part of our active strategic recruiting, we have recently hired a Chief
Operating Officer. If we are unable to retain or successfully assimilate him or
other recently hired individuals then our business, operating results and
financial condition could be materially adversely effected.

Facing Risks of Litigation

On November 10, 1997, Vedatech commenced an action in the High Court of
Justice Chancery Division in the United Kingdom against Seagate Software
Information Management Group Ltd., a wholly owned subsidiary of Seagate
Software, claiming breach of an oral agreement and infringement of a Vedatech
U.K. copyright in the Japanese translation of one of our products and is
seeking monetary and injunctive relief. No specific damage amount has yet been
claimed with the exception of $240,000 ((Yen)26.0 million) for unpaid invoices
in connection with the quantum meruit claim. Vedatech seeks to enjoin us from
infringing the U.K. copyright and seeks forfeiture to Vedatech of all
infringing software copies. We have hired local counsel in the U.K., reviewed
documents, conducted interviews and participated in the discovery process. On
August 22, 2000, Vedatech requested and obtained permission from the court to
amend its action to include claims for unjust enrichment, unlawful interference
and quantum meruit. We have deposited with the court an amount equal to
$200,000 in relation to the quantum meruit claim. We have filed an amended
response. Discovery is ongoing, and the court has set the matter for trial on
June 5, 2001. With the exception of the quantum meruit claim, we believe the
complaint has no merit, and intends vigorously to defend the action. However,
if an unfavorable outcome were to arise, there can be no assurance that such
outcome would not have a material adverse affect on our liquidity, financial
position or results of operations. The outcome of this matter and amount of
related claims are not determinable at this time.

In addition to the foregoing, we are subject to other litigation in the
ordinary course of our business. While we believe that the ultimate outcome of
these matters will not have a material adverse affect on us, the outcome of
these matters is not determinable and negative outcomes may adversely affect
our financial position, liquidity, or results of operations.

Revenue Recognition

In accordance with generally accepted accounting principles, several
factors may require us to defer recognition of our revenues for a significant
period of time. Such revenue recognition factors include:

. whether the revenues are associated with the performance of services;

. whether the license agreement relates to currently unavailable software
products;

37
<PAGE>

. whether the license agreement includes customer acceptance based on
future performance obligations; and

. whether license fees are sold in a multiple element contract where
insufficient VSOE exists relating to the fair value of an undelivered
element.

Our deferred revenue as of September 29, 2000 and June 30, 2000 was $20.4
million and $19.5 million, respectively. The timing of our ultimate recognition
of our deferred revenue is dependent upon the fulfillment of various
obligations such as services and also by certain actions performed by our
customers. Deferred revenue at any specific date may not be a true
representation of actual revenues for any succeeding period.

Our ability to recognize revenues is based upon whether delivery has
occurred, evidence of an arrangement exists, the fee is fixed or determinable
and collectability is deemed probable by management. We believe we adhere to
these rules and interpret them in a conservative manner. As guidance on revenue
recognition for software companies is evolving and subject to ongoing
interpretation by government and other regulatory bodies, there can be no
assurance that our current revenue recognition policies will always be in full
compliance. If we were forced to change our revenue recognition policy due to
perceived failure to fully adhere to revenue recognition policies, our
financial condition could be materially adversely affected.

There is no established trading market for our common stock, and we do not
expect that any trading market will be established.

Our common stock is not listed on any stock exchange, over-the-counter
market or other quotation system. In connection with this registration
statement, we are not registering shares of our common stock for sale to the
public or registering for resale shares held by our stockholders or that may be
acquired by our optionees. We do not expect to register our common stock for
sale to the public or to apply for quotation of our shares on any exchange,
over-the-counter market or quotation system. As a result, a purchaser of our
common stock will not be able to dispose of the shares the purchaser acquires
from us unless the purchaser can rely on an applicable exemption from
registration, such as Rule 144 under the Securities Act of 1933. We may not
comply with the criteria required for a holder of our common stock to utilize a
given exemption.

In the event that a trading market for our common stock develops, the market
prices of our common stock will likely be subject to substantial price and
volume fluctuations due to a number of factors, many of which will be beyond
our control, which may prevent our shareholders from reselling our common stock
at a profit

The securities markets have experienced significant price and volume
fluctuations in the past, and the market prices of the securities of technology
companies have been especially volatile. This market volatility, as well as
general economic, market or political conditions, could reduce the market price
of our common stock in spite of our operating performance. In addition, our
operating results could be below the expectations of investment analysts and
investors, and in response the market price of our common stock could decrease
significantly. Investors may be unable to resell their shares of our common
stock at or above the purchase price paid by the investors. In the past,
companies that have experienced volatility in the market price of their stock
have been the object of securities class action litigation. If we were the
object of securities class action litigation, it could result in substantial
costs, liabilities and a diversion of management's attention and resources.

38
<PAGE>

ITEM 2A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could vary materially as a result of a number of
factors including those set forth in the Risk Factors section.

As of September 29, 2000 and June 30, 2000, our cash balances were mostly
held by our foreign operations. The remainder of our cash balances is centrally
managed by Seagate Technology. If cash from operations is not sufficient to
fund working capital and operating activities, Seagate Technology provides
financing to us through a revolving loan agreement. The revolving loan
agreement provides for maximum outstanding borrowings of up to $60.0 million
and was renewed on July 4, 2000. As of September 29, 2000 and June 30, 2000,
the revolving loan balance was a net receivable from Seagate Technology and its
affiliates of $25.3 million and $25.7 million, respectively. We pay or receive
interest at the LIBOR rate plus 2% per annum on net outstanding balances
payable or receivable. The average rate of interest was 8.62% and 7.85% for the
quarter ended September 29, 2000 and the year ended June 30, 2000,
respectively. Our interest income or expense therefore will fluctuate depending
on fluctuations in the LIBOR rate and fluctuations in the amounts borrowed from
Seagate Technology to fund working capital and operating activities. Net
interest income of $242,000 and net interest expense of $583,000 were incurred
on the net receivable/loan balance for the quarter ended September 29, 2000 and
the year ended June 30, 2000, respectively. We do not have any investments in
equity or debt securities traded in the public markets. Therefore, we do not
currently have any direct equity price risk.

A majority of our sales are in the United States and therefore are recorded
in U.S. dollars, the currency in which we report our operating results. We
conduct a portion of our business in currencies other than the U.S. dollar. The
functional currency of most of our foreign operations is the local currency. In
such cases, assets and liabilities recorded in foreign currencies are
translated at the exchange rate on the balance sheet date. Translation
adjustments resulting from this process are charged or credited to other
comprehensive income. Revenues and expenses are translated at average rates of
exchange prevailing during the year. Gains and losses on foreign currency
transactions are included in other expenses. For those foreign operations whose
functional currency is the U.S. dollar, financial results are translated using
a combination of current and historical exchange rates and any translation
adjustments are included in net earnings, along with all transaction gains and
losses for the period. Historically, we have generated revenues and incurred a
significant proportion of our expenses in Canadian Dollars, Deutsche Marks,
British Pounds Sterling, French Francs, the Australian Dollar and Japanese Yen
and we expect to generate a significant portion of our revenues and expenses in
the Euro in the future. Currently, none of our foreign operations have
significant transactions in the Euro, however we anticipate implementing Euro-
based transactions effective January 2001. To date, the foreign exchange gains
and losses on transactions and revenues reported by our foreign subsidiaries
have not been significant. In addition, since most of our foreign operations
conduct business in their local currency, our earnings are not significantly
impacted by fluctuations in exchange rates. Translation adjustments from
consolidation of such foreign operations are presented within comprehensive
income. However, we cannot provide any assurance that foreign currency
denominated transactions will continue to be insignificant as revenues from the
foreign operations increase or there are significant exchange rate
fluctuations. We cannot predict the effect of exchange rate fluctuations upon
our future operating results. For fiscal 2000, we did not engage in a foreign
currency hedging program to cover any exposure we may have had. For fiscal
2000, a combined variation of 10% of the exchange rates of the main currencies
in which we conduct business--the Canadian Dollar, the Australian Dollar, the
Euro, the British Pound Sterling and the Japanese Yen would have generated a
combined 1% variation of our revenues, offset by a 6% combined variation of
expenses.

39
<PAGE>

ITEM 3. PROPERTIES

Our executive offices are located in Scotts Valley, California. Our
principal facilities are located in Canada and the United Kingdom. The majority
of our facilities are occupied under leases that expire at various times
through 2007. The following is a summary of square footage leased by us as of
June 30, 2000:

Facilities

<TABLE>
<CAPTION>
Total
Location Square Feet
-------- -----------
<S> <C>
North America
Canada........................................................ 130,352(1)
Northern California........................................... 3,364
Colorado...................................................... 11,608
Mid-Continent................................................. 6,574(2)
Northeast USA................................................. 9,107
Southeast USA................................................. 19,555(3)
Other USA..................................................... 0
-------
Total North America........................................ 180,560
Europe
England....................................................... 40,872
France........................................................ 5,617
Germany....................................................... 9,181
Other Europe.................................................. 2,332
-------
Total Europe............................................... 58,002
Asia
Australia..................................................... 6,972(4)
Japan......................................................... 3,469
Singapore..................................................... 2,125
Hong Kong..................................................... 1,670
-------
Total Asia................................................. 14,236
-------
Total.................................................... 252,798
=======
</TABLE>
--------
(1) Excludes approximately 44,708 square feet of unoccupied space.
(2) Excludes approximately 2,071 square feet of space leased to others.
(3) Excludes approximately 2,938 square feet of space leased to others.
(4) Excludes approximately 2,410 square feet of unoccupied space and 2,798
square feet of space leased to others.

40
<PAGE>

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of our outstanding shares of our common stock on an as-converted
basis as of September 29, 2000 by (i) each person who is known to us to be the
beneficial owner of 5% or more of our outstanding common stock, (ii) each of
our executive officers named in the Summary Compensation Table below, (iii)
each of our directors and (iv) all directors and executive officers as a group.

<TABLE>
<CAPTION>
Number of Percent of
Common Common
Equivalent Equivalent
Shares(1) Shares(1)
---------- ----------
<S> <C> <C>
Seagate Software (Cayman) Holdings(2)................... 75,001,000 99.7%
P.O. Box 265GT
Walker House
Georgetown
Grand Cayman
Cayman Islands

Stephen J. Luczo(3)..................................... 75,199,214 99.9%

Donald L. Waite(4)...................................... 75,051,000 99.8%

Gary B. Filler(5)....................................... 75,014,541 99.7%

Lawrence Perlman(6)..................................... 75,014,541 99.7%

Gregory B. Kerfoot(7)................................... 75,813,499 99.7%

Eric Patel(8)........................................... 62,500 *

All directors and executive officers as a group (6
persons)(9)........................................... 76,151,295 99.9%
</TABLE>
--------
* Less than one percent.
(1) Applicable percentage ownership is based on 75,227,050 shares of common
stock outstanding as of September 29, 2000 together with applicable options
for such stockholder exercisable on September 29, 2000 or within 60 days
thereafter. We determined beneficial ownership in accordance with the rules
of the Securities and Exchange Commission based on factors including voting
and investment power with respect to shares subject to applicable community
property laws. Common stock issuable upon the exercise of options currently
exercisable or exercisable within 60 days after September 29, 2000 are
deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage of any other person.
(2) Seagate Software (Cayman) Holdings acquired 75,001,000 shares of our common
stock on November 22, 2000 in connection with the SAC Transaction described
in "Item 1--Business--Sale of Seagate Technology."
(3) Includes 175,000 shares of common stock that are subject to repurchase by
Seagate Software. Seagate Software's repurchase right lapses for 43,750
shares each October 22, 2000, 2001, 2002 and 2003. Includes 23,214 shares
of common stock that may be acquired upon the exercise of stock options
exercisable within 60 days after September 29, 2000. Includes 75,001,000
shares of common stock beneficially owned by Seagate Software (Cayman)
Holdings to which Mr. Luczo may be deemed, in his capacity as an officer of
Seagate Technology, to have shared voting or dispositive power. Mr. Luczo
disclaims such beneficial ownership.
(4) Includes 50,000 shares of common stock that are subject to repurchase by
the company. Seagate Software's repurchase right lapses for 12,500 shares
each October 22, 2000, 2001, 2002 and 2003. Includes 75,001,000 shares of
common stock beneficially owned by Seagate Software (Cayman) Holdings to
which Mr. Waite may be deemed, in his capacity as an officer of Seagate
Technology, to have shared voting or dispositive power. Mr. Waite disclaims
such beneficial ownership.
(5) Includes 13,541 shares of common stock that may be acquired upon exercise
of stock options exercisable within 60 days after September 29, 2000.
Includes 75,001,000 shares of common stock beneficially owned by Seagate
Software (Cayman) Holdings to which Mr. Filler may be deemed, in his
capacity as a director of Seagate Technology, to have shared voting or
dispositive power. Mr. Filler disclaims such beneficial ownership.
(6) Includes 13,541 shares of common stock that may be acquired upon exercise
of stock options exercisable within 60 days after September 29, 2000.
Includes 75,001,000 shares of common stock beneficially owned by Seagate
Software (Cayman) Holdings to which Mr. Perlman may be deemed, in his
capacity as a director of Seagate Technology, to have shared voting or
dispositive power. Mr. Perlman disclaims such beneficial ownership.
(7) Includes 812,499 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after September 29,
2000. Includes 75,001,000 shares of common stock beneficially owned by
Seagate Software (Cayman) Holdings to which Mr. Kerfoot may be deemed, in
his capacity as a director of Seagate Technology, to have shared voting or
dispositive power. Mr. Kerfoot disclaims such beneficial ownership.
(8) Includes 62,500 shares of common stock that may be acquired upon the
exercise of stock options exercisable within 60 days after September 29,
2000.
(9) See notes 3 through 8.

41
<PAGE>

ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers and certain information about them as
of December 15, 2000 are as follows:

<TABLE>
<CAPTION>
Director or Executive
Name Age Position Officer Since
---- --- -------- ---------------------
<S> <C> <C> <C>
Gregory B. Kerfoot...... 40 President, Chief Executive Officer and Director 1999

William Gibson.......... 52 Chief Operating Officer 2000

Eric Patel.............. 44 Chief Financial Officer 1999

Stephen J. Luczo........ 43 Chairman of the Board of Directors 1999

Gary B. Filler.......... 59 Director 1999

Lawrence Perlman........ 62 Director 1999

Donald L. Waite......... 67 Director 1999
</TABLE>

Mr. Kerfoot has served as our Chief Executive Officer since August 2000 and
as President and a Director since August 1999. Mr. Kerfoot joined Seagate
Technology in May 1994 when Seagate Technology acquired Crystal Computer
Services Inc., and he continued as Director of Research and Development for
such subsidiary. In May 1996, he was appointed President of the IMG business
and later in the year was named Executive Vice President and General Manager of
the IMG business. In fiscal 1998, Mr. Kerfoot was named Chief Strategic Officer
for Seagate Software Holdings, as well as Executive Vice President and General
Manager of the IMG business. In August 1999, he was appointed as our President,
Chief Operating Officer and a Director. Mr. Kerfoot also serves as a member of
the board of directors of VERITAS, a software company.

Mr. Gibson has served as our Chief Operating Officer since September. From
April 1998 to August 2000, Mr. Gibson served as the President, Western Region,
of Rogers Wireless, Inc., a communications company. From August 1997 to March
1998, Mr. Gibson served as Vice President--Business Units at Lucent
Technologies. Mr. Gibson served as Vice President and General Manager at Sprint
PCS from April 1997 to August 1997. Mr. Gibson served as Vice President and
Marketing Manager of Ameritech Cellular and Paging from June 1993 to April
1997.

Mr. Patel has served as our Chief Financial Officer since November 1999.
From February 1997 to November 1999, Mr. Patel served in various capacities at
University Games, a board game manufacturing company, the most recent of which
was Chief Financial Officer and Vice President of Operations and International
Sales and Marketing. From May 1993 to December 1996, Mr. Patel served as
Director of Strategy for Dreyers Ice Cream.

Mr. Luczo has served as our Chairman of the Board of Directors since August
1999 and as our Chief Executive Officer from August 1999 to August 2000. Mr.
Luczo became the Chief Executive Officer and a director of Seagate Technology
LLC and SAC on November 22, 2000. From July 1998 to November 2000, he served as
President and Chief Executive Officer of Seagate Technology and was a director
of Seagate Technology from August 1998 to November 2000. He joined Seagate
Technology in October 1993 as Senior Vice President, Corporate Development. In
March 1995, he became Executive Vice President, Corporate Development and Chief
Operating Officer of the Software Group. Mr. Luczo also serves as a member of
the boards of directors of Gadzoox Microsystems, Inc., a networking storage
company and VERITAS, a software company.

Mr. Filler has served as a member of our board of directors since August
1999. Mr. Filler has been a financial consultant since September 1996. He was
Senior Vice President and Chief Financial Officer of Diamond Multimedia
Systems, Inc., a multimedia and graphics company, from January 1995 to
September 1996. Mr. Filler also serves as a member of the board of directors of
Sento Corporation, a web-based customer contract center company.

42
<PAGE>

Mr. Perlman has served as a member of our board of directors since August
1999. Mr. Perlman serves as the Chairman of the Board, President and Chief
Executive Officer of Ceridian Corporation, a technology based services company
and was appointed Chairman of its board of directors in November 1992. Mr.
Perlman previously held several executive positions at Control Data
Corporation, a computer hardware company, including President and Chief
Executive Officer of Imprimis Technology Incorporated, a subsidiary of Control
Data Corporation. Mr. Perlman serves as a member of the boards of directors of
Computer Network Technology Corporation, a networking hardware and software
company, Valspar Corporation, an architectural and industrial paint and coating
company, AMDOCS Ltd., a software company, and Carlson Companies, Inc., a travel
company.

Mr. Waite has served as a member of our board of directors since August
1999. From November 2000, Mr. Waite has served as Executive Vice President and
Chief Administrative Officer of SAC and Seagate Technology LLC. From March 1995
to November 2000, Mr. Waite served as Executive Vice President and Chief
Administrative Officer of SAC and Seagate Technology. Mr. Waite served as
Executive Vice President and Chief Administrative Officer of Seagate
Technology. Mr. Waite also served as Chief Financial Officer of Seagate
Technology from October 1983 to February 1999. Mr. Waite joined Seagate
Technology in 1983 and has served in various roles prior to being named to his
current position in March 1995. Mr. Waite serves as a member of the board of
directors of California Micro Devices, a thin-film semiconductor company.

43
<PAGE>

ITEM 6. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation we paid to our Chief
Executive Officer, our President and our next most highly compensated executive
officer (collectively, the "Named Executive Officers"), each of whose
compensation exceeded $100,000 in fiscal 2000.

<TABLE>
<CAPTION>
Long-Term
Compensation
Securities
Underlying
Name and Principal Fiscal Other Annual Options
Position Year Salary($) Bonus($) Compensation($) Granted(1)
----------------------- ------ --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Stephen J. Luczo....... 2000 $ 90,781(2) -- -- 275,000
Chairman of the Board
of Directors

Gregory B. Kerfoot..... 2000 238,090 -- $584 3,000,000
President and Chief
Executive Officer(3)

Eric Patel............. 2000 114,430 $56,771 -- 250,000
Chief Financial
Officer(4)
</TABLE>
--------
(1) The stock options listed in the table represent options to purchase our
Common Stock. See "Executive Compensation--Option Grants in Fiscal 2000"
for additional information regarding options to purchase our stock granted
during fiscal 2000.
(2) Amount represents the percentage of Mr. Luczo's salary from which we
directly benefited. Mr. Luczo served as our Chief Executive Officer during
fiscal 2000, until Mr. Kerfoot's appointment in August 2000. We paid
Seagate Technology directly for our percentage of Mr. Luczo's salary under
a general services agreement. See Related Party Transactions note to the
Consolidated and Combined Financial Statements.
(3) Mr. Kerfoot served as our President and Chief Operating Officer during
fiscal 2000 and was appointed to President and Chief Executive Officer in
August 2000.
(4) Mr. Patel's compensation is since his joining the Company in November 1999
as our Chief Financial Officer.

Option Grants in Fiscal 2000

The following table sets forth certain information concerning grants of
stock options to each of our Named Executive Officers during fiscal 2000.

<TABLE>
<CAPTION>
% of Total Potential Realizable Value at
Number of Options Assumed Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for Option
Underlying Employees or Base Term(3)
Options in Fiscal Price per Expiration ------------------------------
Name Granted(1) Year Share(2) Date 5% 10%
---- ---------- ---------- --------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven J. Luczo......... 275,000 2.89% $4.00 11/18/09 $ 691,784 $ 1,753,117
Gregory B. Kerfoot...... 1,000,000 10.52% 4.00 11/18/09 2,515,579 6,374,970
2,000,000 21.05% 4.00 5/19/10 5,031,157 12,749,940
Eric Patel.............. 250,000 2.63% 4.00 11/18/09 628,895 1,593,742
</TABLE>
--------
(1) All stock options granted to Named Executive Officers in fiscal 2000 vest
as to 25% of the shares on the first anniversary of the date of grant and
as to 1/48th per month thereafter for the remaining shares. Under the 1999
and 2000 Option Plans, our Board retains discretion to modify the terms,
including the price, of outstanding options.
(2) Options were granted at an exercise price equal to the fair market value of
our Common Stock on the grant date, as determined by our Board of
Directors. Given the fact that there is no trading value for our stock, the
Board of Directors determines the fair market value by considering a number
of factors, including, but not limited to, an independent valuation of our
company performed in November 1999; comparisons of certain of our key
valuation metrics compared with similar metrics for comparable publicly
traded companies, including measures of market capitalization based on
revenue multiples and operating margins; our historical and current
financial performance and prospects for future growth and profitability;
and the status of product releases and product integration.
(3) Potential realizable value is based on the assumption that our common stock
appreciates at the annual rate shown (compounded annually) from the date of
grant until the expiration of the ten-year option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect our estimate of future stock price
growth.

44
<PAGE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values

The following table sets forth certain information regarding the exercise
of stock options in the last fiscal year by the Named Executive Officers and
the value of options held by such individuals at the end of fiscal 2000.

<TABLE>
<CAPTION>
Number of Number of Securities Value of Unexercised
Shares Underlying Unexercised in-the-Money Options
Acquired Value Options at 2000 Year End at 2000 Year End(2)
on Received ------------------------- -------------------------
Name Exercise $(1) Exercisable Unexercisable Exercisable Unexercisable
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Luczo........ -- -- -- 275,000 $-- $--
Gregory B. Kerfoot...... -- -- -- 3,000,000 -- --
Eric Patel.............. -- -- -- 250,000 -- --
</TABLE>
--------
(1) Market value of our common stock at the exercise date minus the exercise
price.
(2) Market value of our common stock at fiscal year end minus the exercise
price. The fair market value of our common stock on June 30, 2000, as
determined by the Compensation Committee of our Board of Directors, was
$4.00 per share. To determine the fair market value of our common stock,
the Compensation Committee of the Board of Directors considers a number of
factors, including, but not limited to, our current financial performance
and prospects for future growth and profitability, the status of product
releases and product integration, the absence of a resale market for our
common stock, the control position held by Seagate Software Holdings and
ultimately, Seagate Technology and comparisons of certain of our key
valuation metrics with similar metrics for comparable publicly traded
companies, including measures of market capitalization based on revenue
multiples, price-to-earnings ratios and operating margins.

Incentive Plans

1999 Stock Option Plan

Our board of directors approved our 1999 Stock Option Plan ("1999 Plan") in
November 1999 and reserved 22,500,000 shares of common stock for issuance under
the 1999 Plan.

The 1999 Plan provides for grants of incentive stock options to employees,
including officers and employee directors and nonstatutory stock options to
employees and consultants, including nonemployee directors of our company, our
parent and subsidiary companies. The purposes of our 1999 Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to our employees and
consultants and to promote the success of our business. At the request of the
board of directors, the compensation committee administers our 1999 Plan and
determines the optionees and the terms of options granted, including the
exercise price, number of shares subject to the option and the exercisability
thereof.

The term of the options granted under the 1999 Plan is set forth in the
option agreement. However, the term of an incentive stock option may not exceed
ten years and, in the case of an option granted to an optionee who owns more
than 10% of our outstanding stock at the time of grant, the term of an option
may not exceed five years. Options granted under the 1999 Plan are granted at
fair market value and vest over 48 months, with 1/4th vesting upon completion
of one year from the date of grant and the remaining options vesting at the
rate of 1/48th per month thereafter.

With respect to any optionee who owns more than 10% of our outstanding
stock, the exercise price of any incentive stock option granted must be at
least 110% of the fair market value on the grant date.

No incentive stock options may be granted to an optionee, which, when
combined with all other incentive stock options becoming exercisable in any
calendar year that are held by that person, would have an aggregate fair market
value in excess of $100,000. In any fiscal year, we may not grant any employee
options to purchase more than 5,000,000 shares.

In the event of a merger of the company or a sale of substantially all of
the assets of the company, any option which is not assumed or instituted by a
successor or shall fully vest and then terminate upon the consumption of the
merger or sale.

The 1999 Plan will terminate in November 2009, unless our board of
directors terminates it sooner.

45
<PAGE>

As of September 29, 2000, we issued 226,050 shares of common stock upon the
exercise of options granted under the 1999 Plan and had granted 8,721,716
options to purchase shares of our common stock.

2000 Stock Option Plan

Our board of directors approved our 2000 Stock Option Plan ("2000 Plan") in
June 2000 and reserved 200,000 shares of common stock for issuance under the
2000 Plan.

The 2000 Plan provides for grants of incentive stock options to employees
and nonstatutory stock options to employees and consultants of our company, our
parent and subsidiary companies. The purposes of our 2000 Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to our employees and
consultants and to promote the success of our business. At the request of the
board of directors, the compensation committee administers our 2000 Plan and
determines the optionees and the terms of options granted, including the
exercise price, number of shares subject to the option and the exercisability
thereof.

The term of the options granted under the 2000 Plan is set forth in the
option agreement. However, the term of an incentive stock option may not exceed
ten years and, in the case of an option granted to an optionee who owns more
than 10% of our outstanding stock at the time of grant, the term of an option
may not exceed five years. Options granted under the 2000 Plan are granted at
fair market value and become fully vested and exercisable immediately prior to
a merger or asset sale (excluding the SAC transaction), or on the date upon
which an initial public offering is declared effective by the United States
Securities Exchange Commission. Compensation expense will have to be recognized
upon vesting of these options as all of the options under this plan have been
granted to employees of our parent or another subsidiary within the
consolidated group.

The 2000 Plan will terminate in June 2010, unless our board of directors
terminates it sooner.

As of September 29, 2000, we had granted 161,450 options to purchase shares
of our common stock, however no shares had been issued upon the exercise of
options under the 2000 Plan.

Seagate Technology Employee Stock Purchase Plan

Our employees also participate in the Seagate Technology Employee Stock
Purchase Plan (the "Purchase Plan"). The Purchase Plan permits eligible
employees who have completed thirty days of employment prior to the inception
of the offering period to purchase common stock of Seagate Technology through
payroll deductions. Under the Purchase Plan, our employees purchased 57,245,
35,113 and 39,361 shares of Seagate Technology common stock in fiscal 2000,
1999 and 1998, respectively. The Purchase Plan will terminate in connection
with the closing of the SAC Transaction and the Merger.

The purposes of the Purchase Plan are to provide employees of Seagate
Technology and those majority-owned subsidiaries of Seagate Technology which
are designated by the Board of Directors to participate in the Purchase Plan
with an opportunity to purchase common stock of Seagate Technology through
accumulated payroll deductions. The Purchase Plan is intended to qualify under
Sections 421 and 423 of the Internal Revenue Code of 1986, as amended (the
"Code").

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<PAGE>

The Purchase Plan provides for administration by the Board of Directors of
Seagate Technology or by a committee appointed by the Board of Directors (for
the purposes of this plan description, "Board of Directors" shall mean either
the Board of Directors or a committee appointed by the Board of Directors). All
questions of interpretation or application of the Purchase Plan are determined
by the Board of Directors or its appointed committee, and its decisions are
final and binding upon all participants. No charges for administrative or other
costs may be made against the payroll deductions of a participant in the
Purchase Plan. Members of the Board receive no additional compensation for
their services in connection with the administration of the Purchase Plan.

The Purchase Plan is implemented by one offering during each six-month
period. Each such offering is of 26 weeks duration. The offering periods
commence during the last week of April and October of each year. The Board of
Directors has the power to alter the duration of the offering periods without
stockholder approval.

Any person who has been employed by Seagate Technology for at least 30 days
prior to the first day of an offering period (or by any of its majority-owned
subsidiaries designated from time to time by the Board of Directors) is
eligible to participate in the Purchase Plan. Eligible employees become
participants in the Purchase Plan by delivering to Seagate Technology's payroll
office a subscription agreement authorizing payroll deductions. An employee who
becomes eligible to participate in the Purchase Plan after the commencement of
an offering may not participate in the Purchase Plan until the commencement of
the next offering.

The price at which shares are sold to participating employees is eighty-
five (85%) of the lower of the fair market value per share of the Common Stock
on (i) the first day of the offering period or (ii) the last day of the
offering period unless: (a) the number of shares available for grant on the
first day of the offering period is less than the number of shares required to
be issued for that offering period and (b) the fair market value of Seagate
Technology's stock on the date additional shares are authorized by the
stockholders is higher than it was on the first day of the offering period, in
which case the offering price shall be the lower of (i) 85% of the fair market
value on the date additional shares are authorized by the stockholders or (ii)
85% of the fair market value on the last day of the offering period. The fair
market value of the Common Stock on a given date is determined by reference to
the closing sale price on the New York Stock Exchange.

The purchase price of the shares is accumulated by payroll deductions over
the offering period. The deductions may not exceed 10%, or such other rate as
may be determined from time to time by the Board of Directors, of a
participant's compensation. A participant may discontinue his or her
participation in the Purchase Plan but may not increase or decrease the rate of
payroll deductions at any time during the offering period. Payroll deductions
shall commence on the first day following the offering date and shall continue
at the same rate until the end of the offering period unless sooner terminated
as provided in the Purchase Plan.

The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
until the shares purchased under the Purchase Plan are sold or otherwise
disposed of. Upon sale or other disposition of the shares, the participant will
generally be subject to tax and the amount of the tax will depend upon the
holding period. If the shares are sold or otherwise disposed of more than two
years from the first day of the offering period and more than one year from the
date the shares are purchased, the participant will recognize ordinary income
measured as the lesser of (a) the excess of the fair market value of the shares
at the time of such sale or disposition over the purchase price or (b) an
amount equal to 15% of the fair market value of the shares as of the first day
of the offering period. Any additional gain will be treated as long-term
capital gain. If the shares are sold or otherwise disposed of before the
expiration of the holding periods, the participant will recognize ordinary
income generally measured as the excess of the fair market value of the shares
on the date the shares are purchased over the purchase price. Any additional
gain or loss on such sale or disposition will be long-term or short-term
capital gain or loss, depending on the holding period. Seagate Technology is
not entitled to a deduction for amounts taxed as ordinary income or capital
gain to a participant except to the extent that it is entitled to a deduction
for ordinary income recognized by participants upon a sale or disposition of
shares prior to the expiration of the holding period(s) described above. The
foregoing is only a

47
<PAGE>

summary of the effect of federal income taxation upon the participant and
Seagate Technology with respect to shares purchased under the Purchase Plan.
Reference should be made to the applicable provisions of the Code. In addition,
the summary does not discuss the tax consequences of a participant's death or
the income tax laws of any state or foreign country in which the participant
may reside.

Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the
Purchase Plan are not determinable. Non-employee directors are not eligible to
participate in the Purchase Plan.

Employment Contracts, Change-of-Control Arrangements and Separation Agreements

We currently do not have change of control or separation agreements with
any of the Named Executive Officers, and we have no compensatory plan or
arrangement with such current Named Executive Officers where the amount to be
paid exceeds $100,000 and which are activated upon resignation, termination or
retirement of any such Named Executive Officer upon a change in control of our
company.

Director Compensation

Directors receive no additional cash compensation for service on the Board
of Directors and any of our committees or sub-committees. During fiscal 2000,
Messrs. Filler, Perlman and Waite were each granted options to purchase 50,000
shares of our common stock.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and directors and persons who own more than ten percent of a
registered class of our equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission
("Commission"). Executive officers, directors and greater than ten percent
stockholders are required by the Commission's regulation to furnish us with
copies of all Section 16(a) forms they file. Currently, we do not have any
individuals that meet these requirements.

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<PAGE>

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Seagate Technology Acquisition of Seagate Software Holdings, Inc.

In October 1999, Seagate Technology completed an acquisition of all
outstanding shares and options to acquire common stock of Seagate Software
Holdings through the merger Seagate Daylight Merger Corp. with and into Seagate
Software Holdings. In connection with the merger, Seagate Technology issued
3.23 shares of its common stock for one share of Seagate Software Holdings
common stock to the holders of Seagate Software Holdings common stock and
options to purchase common stock. All options to purchase shares of Seagate
Software Holdings common stock were vested in full immediately prior to the
closing of the merger. In the event that an optionee of Seagate Software
Holdings had outstanding options immediately prior to the closing of the
merger, those options were net exercised, using the same fair market value as
was applied in the merger, such that the holder received shares of Seagate
Technology common stock. Based on information provided by the exchange agent,
approximately 3,991,105 shares of Seagate Software Holdings common stock were
tendered of which approximately 2,818,325 were exchanged into approximately
9,124,046 shares of Seagate Technology common stock. The difference between the
shares outstanding and the shares exchanged resulted from shares cancelled for
the exercise price and payment of taxes.

As a result of the merger, our directors and officers received the number
of shares of Seagate Technology common stock set forth opposite his name:

<TABLE>
<CAPTION>
Seagate Software Seagate Technology
Name Holdings Shares Shares Issued
---- ---------------- ------------------
<S> <C> <C>
Stephen J. Luczo............................ 76,100 246,370
Gary B. Filler.............................. 13,278 42,987
Lawrence Perlman............................ 3,786 12,258
Donald L. Waite............................. 8,000 25,900
Gregory B. Kerfoot.......................... 410,473 1,328,867
</TABLE>

Shortly after the merger, Seagate Software Holdings contributed all of its
operating assets to us, and we assumed all of the related liabilities of
Seagate Software Holdings (the "Asset Contribution"). As consideration for
these assets, we issued 75,000,000 shares of our common stock to Seagate
Software Holdings.

Other Transactions with Seagate Technology

Pursuant to a general services agreement between Seagate Software Holdings
and Seagate Technology dated June 28, 1997 (the "General Services Agreement"),
Seagate Technology provides various cash management, taxation, administrative,
accounting and similar corporate and managerial services requested by us.
Seagate Software Holdings contributed its rights, and we assumed Seagate
Software Holdings' obligations under the General Services Agreement in
connection with the Asset Contribution. Seagate Technology LLC assumed Seagate
Technology's rights and obligations under the General Services Agreement in
connection with the closing of the SAC Transaction on November 22, 2000.

During the quarter ended September 29, 2000 and fiscal 2000, Seagate
Technology charged us $180,000 and $657,749, respectively, for various
corporate services performed on our behalf. The amounts paid to Seagate
Technology represent a reasonable estimate of Seagate Technology's direct and
indirect costs incurred in performing services for us. The cost allocated to us
is intended to be on a basis no less favorable than we could obtain from an
unaffiliated third party. We have audit rights with respect to the computation
and analysis of service fees pursuant to the General Services Agreement. In
addition, Seagate Technology is required to indemnify, defend and hold us
harmless against any and all claims, suits, actions, demands, proceedings,
losses, damages, liabilities, costs and expenses, including, without
limitation, interest and reasonable attorneys' fees, arising out of, relating
to, or resulting from services performed by Seagate Technology pursuant to the
General

49
<PAGE>

Services Agreement, other than those liabilities that would not have arisen but
for any act, error and/or omission by us and/or any of our officers, directors,
employees and/or agents.

Additionally, on July 4, 2000, we signed the revolving loan agreement with
Seagate Technology LLC, an entity wholly owned by Seagate Technology on
substantially the same terms and conditions as the prior agreement, which was
dated July 4, 1998 and between Seagate Software Holdings and Seagate
Technology. In connection with the Asset Contribution, Seagate Software
Holdings' rights and obligations under the 1998 Intercompany Revolving Loan
Agreement were contributed to and assumed by us. Under the revolving loan
agreement, Seagate Technology finances certain of our working capital
requirements. The revolving loan agreement provides for maximum borrowings of
up to $60.0 million and expires on July 4, 2001. The revolving loan agreement
with Seagate Technology LLC continues in effect subsequent to the closing of
the SAC Transaction on November 22, 2000. The loan is payable or receivable
upon termination of the agreement. We had a receivable from Seagate Technology
of $25.3 million and $25.7 million as of September 29, 2000 and June 30, 2000,
respectively. Borrowings from Seagate Technology were $16.5 million at July 2,
1999. Borrowings from Seagate Technology consist primarily of funding our
operating activities. During the quarter ended September 29, 2000, gross
borrowings and gross repayments under the revolving loan agreement were $35.8
million and $35.4 million, respectively. During fiscal 2000, gross borrowings
and gross repayments under the revolving loan agreement were $176.7 million and
$152.7 million, respectively. We pay interest on a monthly basis at the LIBOR
rate plus 2% per annum (8.62% for the quarter ended September 29, 2000 and
7.85% for fiscal 2000) on such borrowings.

We are included in the consolidated federal and certain combined and
consolidated foreign and state income tax returns of Seagate Technology.
Seagate Technology and Seagate Software Holdings entered into a tax allocation
agreement dated April 4, 1996 pursuant to which we compute hypothetical tax
returns as if we were not joined in consolidated or combined returns with
Seagate Technology. We must pay Seagate Technology the positive amount of any
such hypothetical taxes. If the hypothetical tax returns show entitlement to
refunds, including any refunds attributable to a carryback, then Seagate
Technology will pay us the amount of such refunds. The tax allocation agreement
terminated upon the closing of the SAC Transaction.

Transactions with VERITAS

VERITAS and VERITAS Operating Corporation entered into a three-year Cross
License and OEM Agreement with Seagate Software Information Management (Canada)
Ltd., our wholly owned subsidiary, (the "Cross License Agreement") on May 28,
1999. Our President and Chief Executive Officer, Gregory B. Kerfoot, and our
Chairman, Stephen J. Luczo are members of the board of directors of VERITAS.
The Cross License Agreement provides for the licensing of certain products
between the parties and imposes restrictions on the parties ability to compete
with each other and to enter into agreements with competitors of the other
party. In the fiscal year ended June 30, 2000, we recognized $7,000 of revenues
from VERITAS and paid no royalties to VERITAS in connection with the Cross
License Agreement.

Sale of Seagate Technology

Interests of Seagate Software's Officers and Directors in the SAC
Transaction and the Merger

Mr. Luczo, Mr. Kerfoot and Mr. Waite, who are each members of our board of
directors, each invested in the equity component of the financing for the SAC
Transaction and are shareholders of SAC. The following cash investments were
made: Mr. Luczo contributed $6.9 million, Mr. Kerfoot contributed $17 million
and Mr. Waite contributed $3 million. Mr. Luczo and Mr. Waite also participated
in the financing of the SAC Transaction through the roll-over of a portion of
their outstanding stock and options in Seagate Technology to equity interests
and deferred compensation in SAC.

In addition, Mr. Luczo and Mr. Waite each entered into an employment
agreement with SAC. Each of the employment agreements has a three-year term,
subject to automatic successive one year renewals thereafter.

50
<PAGE>

Under the employment agreements, Mr. Luczo was appointed and serves as Chief
Executive Officer of SAC and Seagate Technology LLC, and Mr. Waite was
appointed and serves as Executive Vice President and Chief Administrative
Officer SAC and Seagate Technology LLC. Mr. Luczo also became a director of SAC
and Seagate Technology LLC.

Each of the members of our board of directors also received shares of
VERITAS common stock and cash to the extent of their outstanding common stock
and options in Seagate Technology, net of any amounts rolled over into equity
and deferred compensation in SAC and its affiliates. The per share amounts paid
to these board members were the same as the amounts paid to other holders of
Seagate Technology common stock.

ITEM 8. LEGAL PROCEEDINGS

ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS

As of September 29, 2000, we had outstanding 75,227,050 shares of Common
Stock held by four shareholders. There is no established public trading market
for any class of our securities.

We have not paid dividends on any of our capital stock and do not
anticipate that any cash dividends will be declared in the foreseeable future.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

We have sold the following securities in the three fiscal years ended June
30, 2000 and the quarter ended September 29, 2000 in reliance on Section 4(2)
of the Securities Act of 1933, as amended:

. we were incorporated in August 1999 and issued 1,000 shares to Seagate
Software Holdings; and

. in November 1999, we issued 75,000,000 shares of our common stock to
Seagate Software Holdings as consideration for the contribution of the
IMG business to us.

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<PAGE>

As of September 29, 2000, a former employee and two directors of Seagate
Software exercised a combined total of 226,050 options under our option plans.
The shares were issued in reliance on Rule 701 under the Securities Act of
1933, as amended.

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

Our authorized capital stock consists of 150,000,000 shares of common
stock, $.001 par value per share. Pursuant to this Registration Statement, we
are registering under the Securities and Exchange Act of 1934, as amended, our
common stock. A description of our common stock follows.

Common stock

Holders of shares of common stock are entitled to one vote per share in all
matters to be voted on by shareholders. Subject to the prior rights of holders
of outstanding shares of Preferred Stock, if any, the holders of common stock
are entitled to receive such dividends, if any, as may be declared from time to
time by the Board of Directors in our discretion from funds legally available
therefore and upon our liquidation or dissolution are entitled to receive all
assets available for distribution to the shareholders. The common stock has no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares. All of the
outstanding shares of common stock are fully paid and nonassessable.

We may at any time, out of funds legally available therefore, repurchase
shares of common stock we issued to or held by any person subject to our right
of first refusal or to purchase such shares where the purchase is pursuant to
the exercise of such right of first refusal, in either case whether or not
dividends on any Preferred Stock then outstanding shall have been declared and
paid or funds set aside therefore.

Certain Provisions of Delaware Law

Upon the occurrence of certain events, we may become subject to Section 203
of the Delaware General Corporation Law ("Section 203"). Section 203 will apply
to us if we have a class of stock that is:

. listed on a national securities exchange;

. authorized for quotation on the Nasdaq Stock Market; or

. held of record by more than 2,000 holders.

In general, Section 203 prohibits a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction
which the person became an "interested stockholder," unless

. prior to such date, the Board of Directors of the corporation approved
either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder;

. upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining
the number of shares outstanding those shares owned by (a) persons who
are directors and also officers and (b) employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or

. on or subsequent to such date the business combination is approved by
the board of directors and authorized at an annual or special meeting
of stockholders by the affirmative vote of at least 66 and 2/3% of the
outstanding voting stock, which is not owned by the interested
stockholder.

Section 203 defines business combination to include:

. any merger or consolidation involving the corporation and the
interested stockholder;

. any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the corporation;

52
<PAGE>

. subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interest stockholder;

. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by the interested stockholder; or

. the receipt by the interested stockholder of the benefit of any loans,
advances guarantees, pledges or other financial benefits provided by or
through the corporation.

In general, Section 203 defines an interested stockholder as any entity or
person who, together with affiliates and associates, beneficially owns (or
within three years, did beneficially own) 15% or more of a corporation's voting
stock. The statute could prohibit or delay mergers or other takeover or change
in control attempts with respect to us and, accordingly, may discourage
attempts to acquire our company.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

We are subject to Section 145 of the Delaware General Corporation Law
("Section 145"). Section 145 permits indemnification of our officers and
directors under certain conditions and subject to certain limitations. Section
145 also provides that a corporation has the power to maintain insurance on
behalf of our officers and directors against any liability asserted against
such person and incurred by him or her in such capacity, or arising out of his
or her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of Section
145. Article VI, Sections 6.1, 6.2 and 6.3, of our Bylaws provide for mandatory
indemnification of our directors and officers and permissible indemnification
of employees and other agents to the maximum extent not prohibited by the
Delaware General Corporation Law. For purposes of this section, our "directors"
or "officers" include any person:

. who is or was a director or officer of the corporation;

. who is or was serving at the request of the corporation as a director
or officer of another corporation, partnership, joint venture, trust or
other enterprise; or

. who was a director or officer of a corporation, which was a predecessor
corporation of us, or of another enterprise at the request of such
predecessor corporation.

The rights to indemnity thereunder continue as to a person who has ceased
to be a director, officer, employee or agent and inure to the benefit of the
heirs, executors and administrators of the person. In addition, expenses
incurred by a director or executive officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding by reason of the
fact that he or she is or was our director or officer (or was serving at Our
request as a director or officer of another corporation) shall be paid by us in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by us as authorized by the relevant section of the Delaware
General Corporation Law.

As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
our Certificate of Incorporation provides that, pursuant to Delaware law, our
directors shall not be personally liable for monetary damages for breach of the
directors' fiduciary duty as directors to us and our stockholders. This
provision in the Certificate of Incorporation does not eliminate the directors'
fiduciary duty and in appropriate circumstances equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to us for acts or
omissions not in good faith or involving international misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Section 174 of the Delaware General
Corporation Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.

53
<PAGE>

We have entered into indemnification agreements with each of our directors
and executive officers. Generally, the indemnification agreements attempt to
provide the maximum protection permitted by Delaware law as it may be amended
from time to time and to obtain directors' and officers' insurance if available
on reasonable terms. Moreover, the indemnification agreements provide for
certain additional indemnification. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to us (except
to the extent the court determines he or she is fairly and reasonably entitled
to indemnity for expenses), for settlements not approved by us or for
settlements and expenses if the settlement is not approved by the court. The
indemnification agreements provide for us to advance to the individual any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. In order to
receive an advance of expenses, the individual must submit to us copies of
invoices presented to him or her for such expenses. Also, the individual must
repay such advances upon a final judicial decision that he or she is not
entitled to indemnification. At present, there is no pending litigation or
proceeding involving our director, officer, employee or agent where
indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15.

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

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<PAGE>

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements and Schedules

1. Financial Statements. Our Consolidated and Combined Financial Statements
and subsidiaries and the Report of Independent Auditors are included at pages
F-1 through F-29 of this Registration Statement.

<TABLE>
<CAPTION>
Description Page No.
----------- --------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.................. F-2

Consolidated and Combined Balance Sheets--July 2, 1999, June 30 and
September 29, 2000 (unaudited)................................... F-3

Consolidated and Combined Statements of Operations--Years Ended
July 3, 1998, July 2, 1999 and June 30, 2000 and the quarters
ended October 1, 1999 (unaudited) and September 29, 2000
(unaudited)...................................................... F-4

Consolidated and Combined Statements of Cash Flows--Years Ended
July 3, 1998, July 2, 1999 and June 30, 2000 and the quarters
ended October 1, 1999 (unaudited) and September 29, 2000
(unaudited)...................................................... F-5

Consolidated and Combined Statements of Stockholders' Equity--Years
Ended July 3, 1998, July 2, 1999 and June 30, 2000 and the
quarter ended September 29, 2000 (unaudited)..................... F-6

Notes to Consolidated and Combined Financial Statements............ F-7
</TABLE>

2. Financial Statement Schedules. The following Consolidated and Combined
Financial Statement Schedules and subsidiaries are filed as part of this
Registration Statement and should be read in conjunction with the Consolidated
and Combined Financial Statements and subsidiaries.

<TABLE>
<CAPTION>
Description Page No.
----------- --------
<S> <C>
Schedule II--Valuation and Qualifying Accounts--Accounts
Receivable Allowances.......................................... 58
</TABLE>

Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated and Combined Financial Statements or
notes thereto.

55
<PAGE>

3. Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number
--------
<C> <S> <C>
3.1* Certificate of Incorporation of Registrant
3.2* Bylaws of Registrant as amended and restated
10.1* 1999 Stock Option Plan and form of Stock Option Agreement as
amended and restated
10.1.1* 1999 Stock Option Plan--Canadian Stock Option Agreement
10.1.2* 1999 Stock Option Plan--United Kingdom Sub-Plan as amended and
restated
10.2* 2000 Stock Option Plan and form of Stock Option Agreement
10.3* Seagate Technology, Inc. Employee Stock Purchase Plan as
amended and restated
10.4* Intercompany Revolving Loan Agreement dated July 4, 2000
between the Registrant and Seagate Technology LLC.
10.5* Form of Indemnification Agreement entered into between the
Registrant and its directors and officers
10.6* General Services Agreement dated June 28, 1997 between Seagate
Software Holdings and Seagate Technology, Inc.
10.7* Tax Allocation Agreement dated April 4, 1996 between Seagate
Software Holdings and Seagate Technology, Inc.
10.8*+ Cross License and Original Equipment Manufacturing Agreement
effective October 5, 1998 by and among Seagate Software
Information Management Group, Inc., VERITAS Software
Corporation and VERITAS Operating Corporation.
10.8.1* Amendment No. 1 to Cross License and OEM Agreement dated April
16, 1999
10.9* Lease Agreement dated November 1, 1997 between Seagate Software
Information Management Group, Inc. and Cathedral Ventures
Limited.
10.9.1* Amendment to Lease agreement dated January 27, 1999
10.10* Lease agreement, dated September 27, 1999, between Lauretton
Investments Ltd., Seagate Software Information Management Group
(Canada) Ltd. and Seagate Software, Inc.
10.11* Lease agreement, dated October 18, 1996, between Ravenseft
Properties Limited and Holistic Systems Limited
10.11.1* Amendment to Lease agreement dated May 16, 2000
10.12* Lease agreement, dated June 22, 1998, between Allstate
Insurance Company and Seagate Software, Inc.
10.13* Sublease agreement dated June 18, 1999, between Bellsouth
Mobility Inc. and Seagate Software, Inc.
21.1* Subsidiaries of the Registrant
24.1* Power of Attorney
27.1* Financial Data Schedule
</TABLE>
--------
* Previously filed.
+ Portions of Exhibit 10.8 have been omitted pursuant to a request for
Confidential Treatment. Omitted portions are denoted by an asterisk (*).

56
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 3 to
the Registration Statement to be signed on our behalf by the undersigned,
thereunto duly authorized.

Seagate Software Information
Management Group Holdings, Inc.

/s/ Gregory B. Kerfoot
By: _________________________________
Gregory B. Kerfoot
President and Chief Executive
Officer

Dated: December 27, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
Stephen J. Luczo* Chairman of the Board of December 27, 2000
______________________________________ Directors
(Stephen J. Luczo)

/s/ Gregory B. Kerfoot President and Chief December 27, 2000
______________________________________ Executive Officer
(Gregory B. Kerfoot) (Principal Executive
Officer)

/s/ Eric Patel Chief Financial Officer December 27, 2000
______________________________________ (Principal Accounting and
(Eric Patel) Financial Officer)

Donald L. Waite* Director December 27, 2000
______________________________________
(Donald L. Waite)

Gary B. Filler* Director December 27, 2000
______________________________________
(Gary B. Filler)

Lawrence Perlman* Director December 27, 2000
______________________________________
(Lawrence Perlman)

/s/ Eric Patel
*By: _________________________________
Eric Patel
Attorney-in-Fact
</TABLE>

57
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS--ACCOUNTS RECEIVABLE ALLOWANCES

<TABLE>
<CAPTION>
Balance at Additions Reductions Balance
Beginning of Charged to from Return at
Description Period Return Reserves Reserves End of Period
----------- ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
Return Reserves:
Fiscal Quarter
Ended
September 29,
2000
(unaudited): $1,015,000 $ 19,000 $ 428,000 $ 606,000
---------- ---------- ---------- ----------
Fiscal Year Ended
June 30, 2000: $1,212,000 $1,130,000 $1,327,000 $1,015,000
---------- ---------- ---------- ----------
Fiscal Year Ended
July 2, 1999: $ 647,000 $2,067,000 $1,502,000 $1,212,000
---------- ---------- ---------- ----------
Fiscal Year Ended
July 3, 1998: $ 208,000 $2,250,000 $1,811,000 $ 647,000
========== ========== ========== ==========

<CAPTION>
Balance at Additions to Reductions from Balance
Beginning of Allowance for Allowance for at
Description Period Bad Debts Bad Debts End of Period
----------- ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
Allowance for Bad
Debts:
Fiscal Quarter
Ended
September 29,
2000
(unaudited): $1,679,000 $ 162,000 $ 373,000 $1,468,000
---------- ---------- ---------- ----------
Fiscal Year Ended
June 30, 2000: $1,635,000 $3,191,000 $3,147,000 $1,679,000
---------- ---------- ---------- ----------
Fiscal Year Ended
July 2, 1999: $ 926,000 $1,049,000 $ 340,000 $1,635,000
---------- ---------- ---------- ----------
Fiscal Year Ended
July 3, 1998: $ 317,000 $ 807,000 $ 198,000 $ 926,000
========== ========== ========== ==========
</TABLE>

58
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................... F-2

Consolidated and Combined Balance Sheets as of September 29, 2000
(unaudited), June 30, 2000 and July 2, 1999............................. F-3

Consolidated and Combined Statements of Operations for the Quarters Ended
September 29, 2000 (unaudited) and October 1, 1999 (unaudited) and for
the Years Ended June 30, 2000, July 2, 1999 and July 3, 1998............ F-4

Consolidated and Combined Statements of Cash Flows for the Quarters Ended
September 29, 2000 (unaudited) and October 1, 1999 (unaudited) and for
the Years Ended June 30, 2000, July 2, 1999 and July 3, 1998............ F-5

Consolidated and Combined Statements of Stockholders' Equity for the
Quarter Ended September 29, 2000 (unaudited) and for the Years Ended
June 30, 2000, July 2, 1999 and July 3, 1998............................ F-6

Notes to Consolidated and Combined Financial Statements................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Seagate Software Information Management Group Holdings, Inc.

We have audited the accompanying consolidated and combined balance sheets
of Seagate Software Information Management Group Holdings, Inc. as of June 30,
2000 and July 2, 1999 and the related consolidated and combined statements of
operations, stockholders' equity and cash flows for each of the years in the
three year period ended June 30, 2000. Our audits also included the financial
statement schedule listed in the index at Item 15(a) of the Registration
Statement on Form 10. These financial statements and schedule are the
responsibility of Seagate Software Information Management Group Holdings,
Inc.'s management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material
respects, the consolidated and combined financial position of Seagate Software
Information Management Group Holdings, Inc. at June 30, 2000 and July 2, 1999
and the consolidated and combined results of their operations and their cash
flows for each of the years in the three year period ended June 30, 2000, in
conformity with generally accepted accounting principles in the United States.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

Vancouver, Canada,
July 7, 2000

Chartered Accountants

/s/ Ernst & Young LLP

F-2
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

CONSOLIDATED AND COMBINED BALANCE SHEETS
(In thousands, except share and per share data)

<TABLE>
<CAPTION>
September 29, June 30, July 2,
2000 2000 1999
------------- --------- ---------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash..................................... $ 4,546 $ 3,621 $ 7,419
Loan receivable from Seagate Technology
(note 2)............................... 25,301 25,681 --
Accounts receivable, net (note 4)........ 18,050 16,578 42,727
Income taxes receivable.................. 6,538 6,071 11,655
Inventories (note 5)..................... 517 674 981
Prepaid and other current assets......... 3,872 4,021 2,533
--------- --------- ---------
Total current assets.................. 58,824 56,646 65,315
Capital assets, net (note 6)............... 9,134 9,348 7,293
Goodwill and other intangibles, net (note
7)....................................... 4,845 5,286 7,212
--------- --------- ---------
Total assets.......................... $ 72,803 $ 71,280 $ 79,820
========= ========= =========
LIABILITIES
Current liabilities:
Loan payable to Seagate Technology (note
2)..................................... $ -- $ -- $ 16,517
Accounts payable......................... 8,576 10,190 12,231
Accrued employee compensation............ 9,328 6,004 19,299
Accrued expenses......................... 11,947 12,097 10,879
Deferred revenue......................... 20,389 19,495 17,552
--------- --------- ---------
Total current liabilities............. 50,240 47,786 76,478
Deferred income taxes (note 11)............ 543 381 234
Other liabilities.......................... -- -- 225
--------- --------- ---------
Total liabilities..................... 50,783 48,167 76,937
Commitments and contingencies (notes 17 and
18)

STOCKHOLDERS' EQUITY
Common stock,--150,000,000 shares
authorized; shares issued and
outstanding--75,227,050 at $0.001 par
value per share as of September 29, 2000
and June 30, 2000; no shares authorized
or issued and outstanding as of July 2,
1999 (notes 13 and 14)................... 75 75 --
Additional paid-in capital (notes 13 and
14)...................................... 408,826 407,893 167,038
Accumulated deficit........................ (386,867) (384,688) (163,526)
Accumulated other comprehensive loss....... (14) (167) (629)
--------- --------- ---------
Total stockholders' equity............ 22,020 23,113 2,883
--------- --------- ---------
Total liabilities and stockholders'
equity.............................. $ 72,803 $ 71,280 $ 79,820
========= ========= =========
</TABLE>

See notes to consolidated and combined financial statements.

F-3
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)

<TABLE>
<CAPTION>
For the quarters ended For the years ended
------------------------ ----------------------------------
September 29, October 1, June 30, July 2, July 3,
2000 1999 2000 1999 1998
------------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Licensing............. $ 22,958 $ 15,163 $ 74,182 $ 92,013 $ 81,246
Maintenance, support
and services........ 13,946 12,714 52,336 49,744 34,706
---------- ---------- ---------- ---------- ----------
Total revenues..... 36,904 27,877 126,518 141,757 115,952
Cost of revenues:
Licensing............. 1,028 619 4,096 4,243 3,249
Maintenance, support
and services........ 10,019 10,904 39,681 35,213 26,379
Amortization of
developed
technologies........ 53 43 198 4,545 6,128
Write-off of
developed
technologies (note
7).................. -- -- -- 4,700 --
---------- ---------- ---------- ---------- ----------
Total cost of
revenues......... 11,100 11,566 43,975 48,701 35,756
---------- ---------- ---------- ---------- ----------
Gross profit............ 25,804 16,311 82,543 93,056 80,196
Operating expenses:
Sales and marketing
(notes 8 and 9)..... 17,574 17,196 66,076 65,473 50,725
Research and
development......... 6,212 5,862 24,874 21,224 16,237
General and
administrative
(note 9)............ 4,183 4,388 20,922 13,830 15,062
Amortization of
goodwill and other
intangibles......... 389 1,508 3,038 4,772 3,165
Unusual items (note
9).................. -- 354 242,569 86,714 --
Restructuring costs
(note 10)........... 573 -- 1,301 -- --
---------- ---------- ---------- ---------- ----------
Total operating
expenses......... 28,931 29,308 358,780 192,013 85,189
---------- ---------- ---------- ---------- ----------
Loss from operations.... (3,127) (12,997) (276,237) (98,957) (4,993)
Interest income (note
2).................... 267 6 982 145 297
Interest expense (note
2).................... (12) (394) (1,481) (128) (253)
Net foreign currency
exchange gain (loss).. (33) (34) 519 39 490
---------- ---------- ---------- ---------- ----------
Interest and other,
net................. 222 (422) 20 56 534
---------- ---------- ---------- ---------- ----------
Loss before income
taxes................. (2,905) (13,419) (276,217) (98,901) (4,459)
Benefit from (provision
for) income taxes
(note 11)............. 726 8,767 55,055 2,526 (8,800)
---------- ---------- ---------- ---------- ----------
Net loss................ $ (2,179) $ (4,652) $ (221,162) $ (96,375) $ (13,259)
========== ========== ========== ========== ==========
Net loss per share:
Basic and diluted
(note 12)........... $ (0.03) $ (0.06) $ (2.95) $ (1.28) $ (0.18)
========== ========== ========== ========== ==========
Number of shares used in
basic and diluted net
loss per share........ 75,073,753 75,001,000 75,001,391 75,001,000 75,001,000
</TABLE>

See notes to consolidated and combined financial statements.

F-4
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
For the quarters ended For the years ended
------------------------ -------------------------------
September 29, October 1, June 30, July 2, July 3,
2000 1999 2000 1999 1998
------------- ---------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss............... $ (2,179) $(4,652) $(221,162) $ (96,375) $ (13,259)
Adjustments to
reconcile net loss to
net cash from
operating activities:
Depreciation and
amortization (note
6).................. 1,713 2,479 7,538 12,775 12,087
Bad debt expense
(recovery).......... (266) 543 2,288 1,049 807
Deferred income taxes
(note 11)........... 162 (234) 147 234 --
Stock based
compensation
expense on Seagate
Technology exchange
of shares (note
9).................. -- -- 239,574 77,519 --
Write-off of
developed
technologies
(note 7)............ -- -- -- 4,700 --
Write-off of in-
process research
and development
(note 9)............ -- -- 25 109 --
-------- ------- --------- --------- ---------
(570) (1,864) 28,410 11 (365)
-------- ------- --------- --------- ---------
Changes in operating
assets and
liabilities:
Accounts
receivable......... (1,146) 9,024 24,236 (14,278) (16,054)
Income taxes
receivable......... (435) (10,989) 5,599 (15,593) 1,526
Income taxes
receivable from
Seagate Technology
(note 11).......... -- -- (66,245) 4,954 (2,765)
Inventories.......... 157 269 307 (575) (107)
Prepaid and other
current assets..... 176 (2,874) (1,585) (154) (184)
Accounts payable..... (1,408) 754 (2,133) 4,696 3,433
Accrued employee
compensation....... 3,324 (6,406) (13,295) 13,132 3,921
Accrued expenses..... (122) (633) 1,297 2,077 2,039
Deferred revenue..... 948 (319) 1,985 4,596 6,093
Other liabilities.... -- -- (225) 225 --
-------- ------- --------- --------- ---------
Net cash provided
by (used in)
operating
activities....... 924 (13,038) (21,649) (909) (2,463)
-------- ------- --------- --------- ---------
Investing activities
Acquisition of capital
assets, net.......... (1,058) (278) (6,356) (4,856) (4,765)
Acquisition of
intangible assets.... -- -- -- -- (1,950)
-------- ------- --------- --------- ---------
Net cash (used in)
investing
activities....... (1,058) (278) (6,356) (4,856) (6,715)
-------- ------- --------- --------- ---------
Financing activities
Issuance of common
stock and common
stock eligible for
repurchase (note
14).................. 900 -- 5 -- --
Borrowings from Seagate
Technology........... 35,812 49,569 176,714 131,194 108,469
Payment to Seagate
Technology........... (35,432) (37,717) (152,667) (128,233) (100,243)
-------- ------- --------- --------- ---------
Net cash provided
by financing
activities....... 1,280 11,852 24,052 2,961 8,226
Effect of exchange rate
changes on cash....... (221) 667 155 -- 11
-------- ------- --------- --------- ---------
Increase (decrease)
in cash ......... 925 (797) (3,798) (2,804) (941)
Cash at the beginning
of the period........ 3,621 7,419 7,419 10,223 11,164
-------- ------- --------- --------- ---------
Cash at the end of the
period............... $ 4,546 $ 6,622 $ 3,621 $ 7,419 $ 10,223
======== ======= ========= ========= =========
</TABLE>

See notes to consolidated and combined financial statements.

F-5
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
For the quarter ended September 29, 2000 and for the years ended June 30, 2000,
July 2, 1999 and July 3, 1998
(In thousands, except share data)

<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
----------------- Paid-In Comprehensive Accumulated
Shares Amount Capital Income (Loss) Deficit Total
---------- ------ ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 27,
1997.................. -- $-- $ 84,046 $157 $ (53,892) $ 30,311
Components of
comprehensive loss
Foreign currency
translation.......... (414) (414)
Net loss............... (13,259) (13,259)
---------
Comprehensive loss..... (13,673)
Income tax benefit from
Seagate Technology
stock option
exercises (note 11).. 3 3
---------- --- -------- ---- --------- ---------
Balance at July 3,
1998.................. -- -- 84,049 (257) (67,151) 16,641
Components of
comprehensive loss
Foreign currency
translation.......... (372) (372)
Net loss............... (96,375) (96,375)
---------
Comprehensive loss..... (96,747)
Equity contribution by
Seagate Technology
related to the
acquisition of the
minority interest of
Seagate Software
Holdings, Inc......... 5,448 5,448
Compensation expense for
Seagate Technology
stock exchange offer.. 77,519 77,519
Income tax benefit from
Seagate Technology
stock option exercises
(note 11)............. 22 22
---------- --- -------- ---- --------- ---------
Balance at July 2,
1999.................. -- -- 167,038 (629) (163,526) 2,883
Components of
comprehensive loss
Foreign currency
translation.......... 462 462
Net loss............... (221,162) (221,162)
---------
Comprehensive loss..... (220,700)
Incorporation of Seagate
Software IMG.......... 1,000 1 1
Contribution of IMG
business to Seagate
Software IMG.......... 75,000,000 75 (75)
Issuance of common stock
upon exercise of
employee stock
options............... 1,050 4 4
Equity contribution by
Seagate Technology
related to the
acquisition of the
minority interest of
Seagate Software
Holdings, Inc......... 1,242 1,242
Compensation expense for
Seagate Technology
exchange of shares.... 239,574 239,574
Income tax benefit from
Seagate Technology
stock option exercises
(note 11)............. 109 109
---------- --- -------- ---- --------- ---------
Balance at June 30,
2000.................. 75,002,050 75 407,893 (167) (384,688) 23,113
Components of
comprehensive loss
Foreign currency
translation.......... 153 153
Net loss............... (2,179) (2,179)
---------
Comprehensive loss..... (2,026)
Issuance of common stock
eligible for
repurchase............ 225,000 900
Income tax benefit from
Seagate Technology
stock option
exercises............. 33 33
---------- --- -------- ---- --------- ---------
Balance at September 29,
2000 (unaudited)...... 75,227,050 $75 $408,826 $(14) $(386,867) $ 22,020
========== === ======== ==== ========= =========
</TABLE>

See notes to consolidated and combined financial statements.

F-6
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Information as of September 29, 2000, for the quarters ended September 29,
2000 and October 1, 1999, and subsequent to September 29, 2000 is unaudited)

1. Description of Business and Basis of Presentation

Description of Business

Seagate Software Information Management Group Holdings, Inc. ("Seagate
Software IMG") develops and markets software products and provides related
services enabling business users and information technology professionals to
manage enterprise information. Seagate Software IMG operates in a single
industry segment and its products, commonly referred to as business
intelligence software, permit the analysis and interpretation of data in order
to make business decisions. Seagate Software IMG has over 25 offices and
operations in 14 countries worldwide, including significant operations and
certain administrative functions in Vancouver, Canada. Seagate Software IMG's
primary market is North America where Seagate Software IMG products are sold
through a direct sales force and certain indirect sales channels, such as
distributors and original equipment manufacturer ("OEM") relationships. Outside
North America, Seagate Software IMG products are sold through a direct sales
force, distributors and OEMs.

Seagate Software IMG was incorporated in Delaware in August 1999. Seagate
Software IMG is a majority-owned subsidiary of Seagate Software Holdings, Inc.
("Seagate Software Holdings," previously known as Seagate Software, Inc.), a
wholly owned and consolidated subsidiary of Seagate Technology, Inc. ("Seagate
Technology"). Seagate Technology is a data technology company that provides
products for storing, managing and accessing digital information on computer
systems. As of September 29, 2000 and June 30, 2000, Seagate Technology,
through Seagate Software Holdings, held substantially all of Seagate Software
IMG's outstanding capital stock. On a fully diluted basis as of September 29,
2000 and June 30, 2000, the outstanding minority interests of Seagate Software
IMG amounted to approximately 10.8% and 10.5%, respectively which consisted of
common stock and options to purchase common stock issued pursuant to Seagate
Software IMG's 1999 and 2000 Stock Option Plans. Such options to purchase
Seagate Software IMG's common stock are held by certain employees, directors
and consultants of Seagate Software IMG and its subsidiaries, as well as
Seagate Software Holdings and Seagate Technology.

Basis of Presentation

Seagate Software Holdings commenced operations in May 1994 pursuant to
Seagate Technology's acquisition of Crystal Computer Services, Inc., a company
engaged in developing and marketing report writing software. This acquisition
was accounted for as a pooling of interests.

Prior to May 28, 1999, Seagate Software Holdings comprised two business
units, the Information Management Group ("IMG") business and the Network
Storage Management Group ("NSMG") business. The NSMG business developed and
marketed software products and provided related services enabling information
technology professionals to manage distributed network resources and to secure
and protect enterprise data. On May 28, 1999, Seagate Software Holdings
contributed its NSMG business to VERITAS Software Corporation ("VERITAS") in
exchange for VERITAS common stock.

On November 16, 1999 Seagate Software Holdings contributed the IMG business
to Seagate Software IMG, including the operating assets, liabilities and
interests in subsidiaries, as a contribution of capital. As

F-7
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(Continued)
(Information as of September 29, 2000, for the quarters ended September 29,
2000 and
October 1, 1999, and subsequent to September 29, 2000 is unaudited)

consideration for the IMG business, Seagate Software IMG issued 75,000,000
shares of its common stock to Seagate Software Holdings. Seagate Software
Holdings retained the shares of VERITAS common stock and other non-operating
assets.

The accompanying consolidated and combined financial statements present the
consolidated financial position of Seagate Software IMG and its consolidated
subsidiaries as of June 30, 2000. These financial statements have been prepared
using the historical basis of accounting and are presented as if Seagate
Software IMG had existed as an entity separate from Seagate Software Holdings
during each of the periods presented. The financial statements include the
historical assets, liabilities, revenues and expenses that are directly related
to Seagate Software IMG's operations. For all periods prior to November 16,
1999, the consolidated and combined financial statements present the combined
historical financial position, results of operations, equity and cash flows of
the ongoing IMG business of Seagate Software Holdings and are not necessarily
indicative of what the financial position, results of operations, equity or
cash flows would have been had Seagate Software IMG been an independent legal
entity during the periods presented.

For certain assets and liabilities of Seagate Software Holdings that were
not specifically identifiable with the IMG business, estimates were used to
allocate assets and liabilities to Seagate Software IMG by applying
methodologies management believed to be appropriate.

The statements of operations include all revenues and costs attributable to
Seagate Software IMG, including allocations of certain corporate
administration, finance and management costs. Such costs were proportionately
allocated to the IMG business based on detailed inquiries and estimates of time
incurred by Seagate Software Holdings corporate marketing and general and
administrative departmental managers. In addition, certain of Seagate Software
Holdings operations were previously shared locations involving activities that
pertained to the IMG business as well as to the NSMG business of Seagate
Software Holdings. Costs incurred in shared locations were allocated based on
specific identification, or where specific identification was not possible,
costs were proportionately allocated between the IMG business and the NSMG
business based on either headcount, square footage or a percentage of revenues
as management believed was reasonable. Such costs consisted primarily of
administration and marketing and sales costs related to shared finance and
marketing functions.

Seagate Software IMG operated on a stand-alone basis for fiscal 2000.
Management estimates that additional costs in the form of professional fees and
public reporting costs of $378,000 (unaudited) and $744,000 (unaudited)
respectively, would have been incurred in fiscal 1999 and fiscal 1998 had we
been reporting as a stand-alone entity from Seagate Software Holdings.

Seagate Software IMG operates and reports financial results on a fiscal
year of 52 or 53 weeks ending on the Friday closest to June 30. Accordingly,
fiscal 2000 ended on June 30, 2000, fiscal 1999 ended on July 2, 1999 and
fiscal 1998 ended on July 3, 1998. Fiscal 2000 and 1999 were comprised of 52
weeks and fiscal 1998 was comprised of 53 weeks. Fiscal 2001 will be a 52-week
year and will end on June 29, 2001.

Unaudited Interim Consolidated and Combined Financial Information

The consolidated and combined financial information at September 29, 2000
and for the quarters ended September 29, 2000 and October 1, 1999 is unaudited,
but has been prepared on the same basis as the annual financial statements and,
in the opinion of management includes all adjustments (consisting only of
normal recurring adjustments), that we consider necessary for a fair
presentation of consolidated and combined financial position at that date and
our consolidated and combined results of operations and cash flows for those

F-8
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

periods. Operating results for the interim periods are not necessarily
indicative of results that may be expected for any future periods.

2. Economic Dependence on Seagate Technology

On July 4, 2000, Seagate Software IMG, Seagate Software Holdings and
Seagate Technology LLC, then a wholly owned subsidiary of Seagate Technology,
renewed the Revolving Loan Agreement dated June 28, 1996. Under the Revolving
Loan Agreement, Seagate Technology finances certain of Seagate Software IMG's
working capital needs and operating activities. The Revolving Loan Agreement
provides for maximum outstanding borrowings of up to $60.0 million and expires
on July 4, 2001. The Revolving Loan Agreement continues in effect subsequent to
the closing of the SAC Transaction on November 22, 2000 (see note 20). The loan
is payable or receivable upon termination of the agreement. As of September 29,
2000 and June 30, 2000, the Revolving Loan balance was a net receivable from
Seagate Technology and its affiliates of $25.3 million and $25.7 million,
respectively. The net receivable arose largely as a result of offsetting
amounts due from Seagate Technology under a Tax Allocation Agreement for income
tax loss benefits utilized by Seagate Technology relative to Seagate Software
IMG's tax loss position (see note 11). The loan balance is presented on the
balance sheet as a net receivable or net payable in accordance with the terms
of the loan agreement. As of July 2, 1999, borrowings from Seagate Technology
and its affiliates were $16.5 million. Beginning in fiscal 1999, interest was
charged on a monthly basis at the LIBOR rate plus 2% per annum (8.62% for the
quarter ended September 29, 2000 and 7.85% for fiscal 2000) on balances
outstanding. Prior to fiscal 1999, Seagate Software IMG previously paid
interest at 6%. Interest income and expense as presented in the statement of
operations primarily relates to interest on the revolving loan.

Seagate Software IMG has incurred net losses during the three year period
ended June 30, 2000 and the quarter ended September 29, 2000. Seagate Software
IMG believes that the amounts due from Seagate Technology under the Revolving
Loan agreement, in addition to the amounts available to Seagate Software IMG
under the Revolving Loan Agreement are sufficient to fund Seagate Software
IMG's operating and planned activities during the next 12 months.

Seagate Software IMG may require additional financing through the end of
fiscal 2002. Seagate Software is in the process of negotiating additional
financing with Seagate Technology LLC through the end of fiscal 2002. Should
additional financing not be available from Seagate Technology LLC at terms that
are satisfactory to Seagate Software IMG and Seagate Technology LLC, Seagate
Software IMG may seek additional equity and financing from other sources.

3. Significant Accounting Policies

Accounting Estimates. The preparation of financial statements, in
conformity with generally accepted accounting principles, requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ materially from those estimates.

Foreign Currency Translation. The functional currency for most of Seagate
Software IMG's foreign operations is the local currency. In such cases, assets
and liabilities recorded in foreign currencies are translated at the exchange
rate on the balance sheet date. Translation adjustments resulting from this
process are charged or credited to other comprehensive income. Revenues and
expenses are translated at average rates of exchange

F-9
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

prevailing during the year. Gains and losses on foreign currency transactions
are included in other expenses. For those foreign operations whose functional
currency is the U.S. dollar, financial results are translated using a
combination of current and historical exchange rates and any translation
adjustments are included in net earnings, along with all transaction gains and
losses for the period.

Revenue Recognition. Licensing revenues are derived from sales of software
licenses. Maintenance, support and services revenues consist of technical
support, training, consulting and maintenance.

Seagate Software IMG recognizes revenues in accordance with Statement of
Position ("SOP") 97-2, "Software Revenue Recognition," as amended by SOP 98-4
"Deferral of the Effective Date of a Provision of SOP 97-2" and by SOP 98-9
"Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions." These amendments deferred and then clarified, respectively, the
specification of what was considered vendor specific objective evidence of fair
value for the various elements in a multiple element arrangement. Seagate
Software IMG adopted the provisions of SOP 97-2 and SOP 98-4 as of the
beginning of fiscal year 1999 and adopted SOP 98-9 as of the beginning of
fiscal year 2000.

SOP 97-2 requires that the total arrangement fee from software arrangements
that include rights to multiple software products, post contract customer
support and/or other services be allocated to each element of the arrangement
based on their relative fair values. Under SOP 97-2, the determination of fair
value is based on vendor specific objective evidence ("VSOE"). Fair value is
established for each element based on its individual sales prices consistent
with Seagate Software IMG's pricing strategy. The pricing strategy is
established by the pricing group, consisting of representatives from our
marketing, sales, finance and product development departments.

Typically, Seagate Software IMG can establish VSOE for all elements of its
multi-element arrangements, and accordingly, revenues are allocated to the
individual elements on the basis of VSOE. Although not typical, some OEM
arrangements contain end-user maintenance elements for which VSOE has not been
established, as sufficient evidence of consistent pricing and renewal rates has
not been present. In such arrangements, Seagate Software IMG has recognized the
arrangement fee ratably over the maintenance period in accordance with the
provisions set forth in SOP 97-2.

Seagate Software IMG generally recognizes licensing revenues, whether sold
direct or through resellers, upon product delivery, provided persuasive
evidence of an arrangement exists, fees are fixed or determinable and the
resulting receivable is deemed collectible by management. In instances where
payments are subject to extended payment terms, revenues are not recognized
until the date payments become due. When an acceptance period is specified in
an arrangement, revenues are recognized upon the earlier of customer acceptance
or the expiration of the acceptance period.

Seagate Software IMG's policy is not to recognize revenues on sales to
distributors or resellers, if resale contingencies exist. Some of the factors
that are considered to determine the existence of such contingencies include
payment terms, collectibility and history with the distributor or reseller.
Revenues are recognized when such contingencies are resolved and the criteria
for revenue recognition in SOP 97-2 are met.

Seagate Software IMG recognizes revenues for sales to distributors and
resellers with rights of return when the criteria for recognizing revenues, as
outlined in SFAS 48, are met. However, we make estimates of future returns and
reduce the revenues and related receivables accordingly by the amount of such
estimates.

Where rights of return exist and the criteria of SFAS 48 are not met,
revenues are not recognized until such time that all of the criteria are met.
We consider factors including historical experience, nature of the

F-10
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

product, fixed or determinable fees, arms length contract terms, the level of
inventory in the distribution channels and the ability to reasonably estimate
returns.

Revenues from technical support and maintenance are recognized ratably over
the term of the arrangement, generally one year. Revenues from training and
consulting are recognized as the services are performed.

Deferred revenue represents amounts from customers under certain license,
maintenance and service arrangements for which the revenue earnings process has
not been completed. These amounts relate primarily to provision of technical
support and maintenance, arrangements with future deliverables and arrangements
where specified customer acceptance has not occurred.

Where software arrangements require Seagate Software IMG to provide
consulting services for significant production, modification, or customization
of software, or where these services are essential to the functionality of the
software, Seagate Software IMG recognizes revenues in accordance with the
provisions of SOP 81-1, "Accounting for Performance of Construction-Type and
Certain Production-Type Contracts". In these arrangements, both the licensing
revenues and consulting services revenues are recognized on the percentage of
completion method based on cost inputs.

Cash Management. Seagate Technology uses a centralized cash management
function for all of its domestic operations, including certain domestic
operations of Seagate Software IMG. A substantial majority of Seagate Software
IMG's cash is from balances maintained by its foreign subsidiaries.

Cash and Cash Equivalents. Seagate Software IMG considers all highly liquid
investments with an original maturity of 90 days or less at the time of
purchase to be cash equivalents. Seagate Software IMG typically uses available
cash in excess of amounts required for operating activities to pay amounts due
under the Revolving Loan Agreement. Accordingly, historically Seagate Software
IMG has not had significant cash equivalents.

Fair Value Disclosures. Seagate Software IMG maintains its cash held by its
foreign subsidiaries principally with major banks in interest and non-interest-
bearing bank accounts. There are no realized or unrealized gains or losses and
fair value approximates carrying value for all cash balances as of the periods
presented herein. The fair values of accounts receivable balances approximate
carrying values.

Derivative Instruments and Hedging Activities. In June 1998, the FASB
issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities", and its
amendments Statements 137 and 138, in June 1999 and June 2000, respectively.
These Statements establish accounting and reporting standards for derivative
instruments and for hedging activities. The Statements require that derivatives
be recognized in the balance sheet at fair value and specifies the accounting
for changes in fair value. Seagate Software IMG adopted SFAS 133, 137 and 138
on July 1, 2000. There was no impact of this adoption on the consolidated and
combined results of operations, financial position and cash flows.

Concentration of Credit and Foreign Currency Risk. Financial instruments
that potentially subject Seagate Software IMG to significant concentrations of
credit risk consist primarily of cash and accounts receivable. Seagate Software
IMG places its cash in high credit quality financial institutions. Year-end
cash balances represent both US Dollar and foreign currency deposits, primarily
denominated in Canadian Dollar, British Pounds Sterling, Japanese Yen and
currencies tied to the Euro. Accounts receivable are derived from

F-11
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

revenues earned from customers primarily located in North America and Europe.
Seagate Software IMG performs ongoing credit evaluations of its customers and
generally does not require collateral. Seagate Software IMG maintains reserves
for potential credit losses.

Overall, Seagate Software IMG's customer base is diverse however, a third-
party customer, Ingram Micro, Inc. ("Ingram") represented 20%, 13% and 14% of
Seagate Software IMG's total revenues in fiscal 2000, fiscal 1999 and fiscal
1998, respectively, and 23% and 19% for the quarters ended September 29, 2000
and October 1, 1999, respectively. As a percentage of receivables, amounts
outstanding from Ingram Micro represent 22% and 18% of the total receivable
balance in fiscal 2000 and fiscal 1999, respectively, and 22% and 16% of the
total receivable balance in the quarters ended September 29, 2000 and October
1, 1999, respectively. Seagate Software IMG's agreements with Ingram may be
terminated upon the expiration of a required notice period.

Inventories. Inventories are stated at the lower of cost (first in, first
out method) or market and consist primarily of materials used in software
products, related supplies and packaging materials.

Capital Assets. Property and equipment, including leasehold improvements,
are stated at cost. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets up to ten years. Leasehold
improvements are depreciated using the straight-line method over the shorter of
the estimated useful lives of the leasehold improvement or the remaining
leasehold life.

Goodwill and Other Intangibles. Goodwill represents the excess of the
purchase price of acquired companies over estimated fair values of tangible and
intangible net assets acquired. Goodwill is amortized on a straight-line basis
over four years. Under SFAS No. 121, the carrying values of long-term assets
and intangibles other than developed technology (included in other intangibles)
are reviewed if facts and circumstances suggest that they may be impaired. If
this review indicates that carrying values of long-term assets and other
intangibles and associated goodwill will not be recoverable based on projected
undiscounted future cash flows, carrying values are reduced to estimated fair
values by first reducing goodwill and second by reducing long-term assets and
other intangibles.

Other intangible assets consist of trademarks, assembled work forces,
distribution networks and developed technology and customer bases. Amortization
of purchased intangibles is provided on the straight-line basis over the
respective useful lives of the assets ranging from 36 to 60 months. In-process
research and development without alternative future use is expensed when
acquired.

In addition, Seagate Software IMG assesses the impairment of goodwill not
included in the scope of SFAS 121 under Accounting Principles Board Opinion No.
17 ("APB 17"), "Intangible Assets". Write-offs and write-downs to net
realizable value of goodwill not included in the scope of SFAS 121 are
typically made only when Seagate Software IMG has effectively abandoned and
stopped selling virtually all of the products acquired in an acquisition.

Developed Technology. Seagate Software IMG applies Statement of Financial
Accounting Standards No. 86 ("SFAS 86"), "Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed" to software technologies
developed internally, acquired in business acquisitions and purchased.

Internal development costs are included in research and development and are
expensed as incurred. SFAS 86 requires the capitalization of certain internal
development costs once technological feasibility is established, which for
Seagate Software IMG generally occurs upon the completion of a working model.
As the time period between the completion of a working model and the general
availability of software has been short,

F-12
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

capitalization of internal development costs has not been material to date.
Capitalized costs are amortized based on the greater of the straight-line basis
over the estimated product life (generally 30 to 48 months) or the ratio of
current revenues to the total of current and anticipated future revenues.

Purchased developed technology is amortized based on the greater of the
straight-line basis over the estimated useful life (30 to 48 months) or the
ratio of current revenues to the total of current and anticipated future
revenues. The recoverability of the carrying value of purchased developed
technology and associated goodwill is reviewed periodically. The carrying value
of developed technology is compared to the estimated future gross revenues from
that product reduced by the estimated future costs of completing and disposing
of that product, including the costs of performing maintenance and customer
support (net undiscounted cash flows) and to the extent that the carrying value
exceeds the undiscounted cash flows the difference is written off.

Comprehensive Income (Loss). Accumulated other comprehensive income (loss)
comprises foreign currency translation gains and losses. Seagate Software IMG
has reported the components of comprehensive loss on its consolidated and
combined statements of stockholders' equity.

Stock-Based Compensation. Seagate Software IMG accounts for employee stock-
based compensation under Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees" and related interpretations. Pro
forma net income and net income per share are disclosures required by Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-
Based Compensation" and are included in the Stock Based Benefits Plans--Pro
Forma Information note to the consolidated and combined financial statements.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensation--an Interpretation of APB Opinion No. 25". FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues,
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to
the terms of the previously fixed stock options or awards; and the accounting
for an exchange of stock compensation awards in a business combination. Seagate
Software IMG adopted FIN 44 on July 1, 2000. There was no impact of this
adoption on Seagate Software IMG's consolidated and combined results of
operations, financial position and cash flows.

Income Taxes. The liability method is used in accounting for income taxes.
Under this method deferred tax assets and liabilities are determined based on
differences between financial reporting and income tax bases of assets and
liabilities and are measured using the enacted tax rates and laws.

4. Accounts Receivable

Accounts receivable are summarized below, in thousands:

<TABLE>
<CAPTION>
June
September 29, 30, July 2,
2000 2000 1999
------------- ------- -------
(unaudited)
<S> <C> <C> <C>
Accounts receivable.......................... $20,124 $19,272 $45,574
Less allowance for bad debts ................ (1,468) (1,679) (1,635)
Less allowance for returns................... (606) (1,015) (1,212)
------- ------- -------
$18,050 $16,578 $42,727
======= ======= =======
</TABLE>

F-13
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

5. Inventories

During fiscal 2000, product support materials in the amount of $350,000
were written off as obsolete. There were no other revaluations of inventory to
the lower of cost or market during fiscal 2000, fiscal 1999, fiscal 1998, or
the quarter ended September 29, 2000.

6. Capital Assets

Capital assets consisted of the following, in thousands:

<TABLE>
<CAPTION>
Estimated September 29, June 30, July 2,
Useful Life 2000 2000 1999
----------------- ------------- -------- -------
(unaudited)
<S> <C> <C> <C> <C>
Equipment............... Two to five years $20,714 $19,686 $14,219
Leasehold improvements.. Life of lease 3,389 3,359 2,665
------- ------- -------
24,103 23,045 16,884
Less accumulated
depreciation.......... (14,969) (13,697) (9,591)
------- ------- -------
$ 9,134 $ 9,348 $ 7,293
======= ======= =======
</TABLE>

Depreciation expense was $4.3 million, $3.4 million and $2.6 million in
fiscal 2000, fiscal 1999 and fiscal 1998, respectively, and $1.3 million and
$0.9 million for the quarters ended September 29, 2000 and October 1, 1999,
respectively.

7. Goodwill and Other Intangibles

Goodwill and other intangibles consisted of the following, in thousands:

<TABLE>
<CAPTION>
September 29, June 30, July 2,
2000 2000 1999
------------- -------- --------
(unaudited)
<S> <C> <C> <C>
Goodwill.................................. $ 5,771 $ 5,771 $ 4,700
Other intangibles:
Developed technologies.................. 18,492 18,492 18,336
Trademark............................... 2,284 2,284 2,237
Assembled work force.................... 4,025 4,025 4,025
Customer base........................... 6,506 6,506 6,469
------- -------- --------
Total other intangibles.............. 31,307 31,307 31,067
------- -------- --------
37,078 37,078 35,767
Accumulated amortization and write-off.... (32,233) (31,792) (28,555)
------- -------- --------
Goodwill and other intangibles............ $ 4,845 $ 5,286 $ 7,212
======= ======== ========
</TABLE>

Amortization of developed technologies is included in costs of revenues.
Cost of revenues includes write-offs to net realizable value of $4.7 million in
fiscal 1999 due to Seagate Software IMG's decision not to use previously
acquired technology in future periods and to reflect the impairment of certain
developed technologies. Seagate Software IMG periodically reviews the net
realizable value of developed technologies under the guidance of SFAS 86.
Seagate Software IMG compares the estimated undiscounted future cash flows on a
product-by-product basis to the unamortized cost of developed technologies and
unamortized costs in excess of the estimated undiscounted cash flows are
written off.

F-14
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

Seagate Software IMG also reviews the carrying value of its intangibles to
ascertain if there has been any impairment. Amortization of goodwill and other
intangibles includes a write-off of $1.5 million in fiscal 1999 due to asset
values that have become impaired.

Seagate Software IMG has capitalized the assembled work force in most of
its acquisitions and amortizes this asset over an expected useful life of 48
months. As more fully described in Note 3, Seagate Software IMG reviews the
carrying value of its long-term assets and intangibles other than developed
technology using the guidance of SFAS 121. To date, there have been no write-
offs or write-downs for impairment of acquired assembled work force recorded in
the financial statements.

8. Advertising Expense

Advertising expense included in sales and marketing expense, totaled $10.9
million, $10.7 million and $6.8 million in fiscal 2000, fiscal 1999 and fiscal
1998, respectively, and $1.3 million and $5.0 million for the quarters ended
September 29, 2000 and October 1, 1999, respectively. The cost of advertising
is expensed as incurred. Seagate Software IMG does not incur any direct
response advertising costs.

9. Related Party Transactions

Seagate Technology has provided substantial services to Seagate Software
IMG under a General Services Agreement dated June 28, 1997. The services
generally include general management, treasury, tax, financial reporting,
benefits administration, insurance, information technology, legal, accounts
payable and receivable and credit functions, among others. Seagate Technology
charges Seagate Software IMG for these services through corporate expense
allocations. The amount of corporate expense allocations depends upon the total
amount of allocable costs incurred by Seagate Technology on behalf of Seagate
Software IMG less amounts charged as a specific cost or expense rather than by
allocation. Such costs have been proportionately allocated to Seagate Software
IMG based on detailed inquiries and estimates of time incurred by Seagate
Technology's corporate marketing and general and administrative departmental
managers. Management believes that the allocation method applied to the costs
provided under the General Services Agreement is reasonable. Allocations
charged to Seagate Software IMG's general and administrative expenses were
$657,749, $279,848 and $273,870 in fiscal 2000, fiscal 1999 and fiscal 1998,
respectively, and $180,000 and $164,437 for the fiscal quarters ended September
29, 2000 and October 1, 1999, respectively. Allocations charged to Seagate
Software IMG's sales and marketing expenses were corporate allocation charges
of zero, $288,000 and $307,792 in fiscal 2000, fiscal 1999 and fiscal 1998,
respectively, and zero for the quarters ended September 29, 2000 and October 1,
1999. Management estimates that additional costs for the services covered under
this agreement would have been $688,000 for fiscal 2000 (unaudited), $755,000
for fiscal 1999 (unaudited) and $719,000 for fiscal 1998 (unaudited), had we
operated on a stand-alone basis from Seagate Technology.

The employees of Seagate Software IMG also participate in the Seagate
Technology Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase
Plan permits eligible employees who have completed thirty days of employment
prior to the inception of the offering period to purchase common stock of
Seagate Technology through payroll deductions at the lower of 85% of the fair
market value of the common stock at the beginning or at the end of each six-
month offering period. Under the Purchase Plan, Seagate Software IMG employees
purchased 57,245, 35,113 and 39,361 shares of Seagate Technology common stock
in fiscal 2000, fiscal 1999 and fiscal 1998, respectively.

The U.S. employees of Seagate Software IMG also participate in the Seagate
Technology tax-deferred savings plan, the Seagate Technology, Inc. Savings and
Investment Plan ("the 401(k) plan"). The 401(k) plan is

F-15
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

designed to provide qualified employees with an accumulation of funds at
retirement. Qualified employees may elect to contribute to the 401(k) plan on a
monthly basis. Seagate Software IMG may make annual contributions to the 401(k)
plan at the discretion of the Board of Directors. Seagate Software IMG made no
material contributions in fiscal 2000, fiscal 1999 or fiscal 1998.

The June 1999 Seagate Technology Exchange Offer

On May 28, 1999, Seagate Software Holdings contributed its NSMG business
and related assets and liabilities to VERITAS in exchange for shares of VERITAS
common stock. In a separate but related transaction on June 9, 1999, Seagate
Technology exchanged 5,275,772 shares of Seagate Technology common stock for
3,267,255 shares of Seagate Software Holdings common stock owned by employees,
directors and consultants of Seagate Software Holdings and its parent and
subsidiaries. The exchange ratio was determined based on the estimated value of
Seagate Software Holdings common stock divided by the fair market value of
Seagate Technology common stock.

The estimated value of Seagate Software Holdings common stock exchanged
into Seagate Technology common stock was determined based upon the sum of the
fair value of the NSMG business, as measured by the fair value of the shares
received from VERITAS, plus the estimated fair value of the IMG business of
Seagate Software Holdings as determined by the Seagate Software Holding's Board
of Directors, plus the assumed proceeds from the exercise of all outstanding
Seagate Software Holdings stock options, divided by the number of fully
converted shares of Seagate Software. The Board of Directors of Seagate
Software Holdings considered a number of factors in determining the estimated
fair value of the IMG business, including historical and projected revenues,
earnings and cash flows, as well as other factors and consultations with
financial advisors.

Related to the June 1999 Seagate Technology Exchange Offer, Seagate
Software Holdings recorded additional compensation expense of $8.6 million for
the issuance of notes payable for the purchase of unvested stock options held
by certain continuing employees. This amount was not considered a capital
contribution from Seagate Technology because the notes payable were issued by
Seagate Software, Inc. In addition, Seagate Software Holdings recorded
compensation expense amounting to $12.7 million for accelerated vesting on
certain stock options for its former Chief Executive Officer and several other
employees, each of whom became employees of VERITAS.

The consolidated and combined statement of operations for fiscal 1999
included an allocation of compensation expense arising from the June 1999
Seagate Technology Exchange Offer attributable to Seagate Software IMG.
Compensation expense was allocated to Seagate Software IMG on the basis of
employees specifically identified with the IMG business who participated in the
exchange and for those employees of

F-16
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

Seagate Software Holdings and Seagate Technology who performed services for the
IMG business on the basis of time estimates. Accordingly, Seagate Software IMG
recorded $77.5 million of compensation expense out of the total compensation
expense of $102.5 million related to the June 1999 Seagate Technology Exchange
Offer as a capital contribution from Seagate Technology. In addition, both the
$630,000 and an offsetting entry of $77.5 million was recorded relating to the
employer portion of payroll taxes and the $8.6 million aforementioned
compensation expense for the purchase of unvested stock options relate to
certain continuing employees of Seagate Software IMG, and therefore both
amounts have been reflected as expenses for fiscal 1999. None of the
aforementioned $12.7 million of compensation expense that arose from the
accelerated vesting on certain stock options for employees who became employees
of VERITAS was allocated to Seagate Software IMG because the compensation
expense was not attributable to employees of Seagate Software IMG.

The following table summarizes the components of the unusual items expense
for fiscal 1999 reported by Seagate Technology, that are attributable to the
employees of Seagate Software IMG:

<TABLE>
<CAPTION>
As reported by Allocated to Seagate
Seagate Technology Software IMG
------------------ --------------------
(in thousands)
<S> <C> <C>
Compensation expense related to
the issuance of Seagate
Technology common stock......... $102,549 $77,519
Compensation expense for
accelerating vesting on stock
options held by certain
employees who became employees
of VERITAS...................... 12,719 --
Compensation expense for the
purchase of unvested stock
options held by certain
continuing employees of Seagate
Software IMG.................... 8,565 8,565
Employer portion of payroll
taxes........................... 630 630
-------- -------
Total unusual items............. $124,463 $86,714
======== =======
</TABLE>

The consolidated and combined financial statements of Seagate Software IMG
at July 2, 1999 also include an allocation of $5.4 million of the $51.8 million
purchase price allocation described above. The allocation to Seagate Software
IMG was based on the fair value of the IMG business relative to Seagate
Software Holdings. A number of factors were considered in determining the
estimated fair value of the IMG business, including historical and projected
revenues, earnings and cash flows, as well as other factors and consultations
with financial advisors.

The allocation of the purchase price to the intangible assets of Seagate
Software IMG as at June 9, 1999 was as follows:

<TABLE>
<S> <C>
Developed technologies........................................ $ 686,000
Trademark..................................................... 158,000
Assembled work force.......................................... 207,000
In-process research and development........................... 109,000
Goodwill...................................................... 4,700,000
Deferred tax liability........................................ (412,000)
----------
Total purchase price allocated.............................. $5,448,000
==========
</TABLE>

F-17
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

The October 1999 Seagate Technology Exchange of Shares

On October 20, 1999, the stockholders of Seagate Software Holdings approved
the merger of Seagate Daylight Merger Corp., a wholly owned subsidiary of
Seagate Technology, with and into Seagate Software Holdings. The merger was
effected on October 20, 1999. Seagate Software Holdings assets consisted of the
assets of the IMG business and its investment in the common stock of VERITAS.
Upon the closing of the merger, Seagate Software Holdings became a wholly owned
subsidiary of Seagate Technology. All outstanding options to purchase Seagate
Software Holdings common stock were accelerated immediately prior to the
merger. In connection with the merger, Seagate Software Holdings minority
stockholders and optionees received payment in the form of 3.23 shares of
Seagate Technology's common stock per share of Seagate Software Holdings common
stock less any amounts due for the payment of the exercise price of unexercised
options. Seagate Technology issued 9,124,046 shares of its common stock from
treasury shares to optionees and minority stockholders of Seagate Software
Holdings in connection with the merger.

The consolidated and combined statement of operations for fiscal 2000
includes an allocation of compensation expense arising from the October 1999
Seagate Technology exchange offer. Compensation expense was allocated to
Seagate Software IMG on the basis of employees specifically identified with the
IMG business and for those employees that performed services for the IMG
business, on the basis of time estimates. Accordingly, Seagate Software IMG
recorded $239.6 million of the $283.6 million compensation expense related to
the October 1999 Seagate Technology exchange of total of shares and offsetting
$239.6 million was recorded as a capital contribution from Seagate Technology.
In addition, the $2.1 million of employer portion of payroll taxes paid relate
to Seagate Software IMG employees and therefore the amount is recorded as an
expense for fiscal 2000.

In addition, $877,000 of legal and accounting costs were incurred by
Seagate Software IMG in connection with the recapitalization and reorganization
of Seagate Software IMG.

The following table summarizes the components of the unusual items expense
for fiscal 2000 reported by Seagate Technology that are attributable to the
employees of Seagate Software IMG:

<TABLE>
<CAPTION>
As reported by Allocated to Seagate
Seagate Technology Software IMG
------------------ --------------------
(in thousands)
<S> <C> <C>
Compensation expense associated with
the exchange of Seagate Software
Holdings common stock for Seagate
Technology common stock.............. $283,619 $239,574
Employer portion of payroll taxes...... 2,118 2,118
Transaction costs...................... 877 877
-------- --------
Total unusual items............... $286,614 $242,569
======== ========
</TABLE>

F-18
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

The consolidated and combined financial statements of Seagate Software IMG
at June 30, 2000 also include an allocation of $1.2 million of the $19.4
million purchase price allocation described above. The allocation to Seagate
Software IMG was based on the fair value of the IMG business relative to the
fair value of Seagate Software Holdings. A number of factors were considered in
determining the estimated fair value of the IMG business, including historical
and projected revenues, earnings and cash flows, as well as other factors and
consultations with financial advisors.

The allocation of the purchase price to the intangible assets of Seagate
Software IMG as at October 20, 1999 was as follows:

<TABLE>
<S> <C>
Developed technologies....................................... $ 156,000
Trademark.................................................... 36,000
Assembled work force......................................... 47,000
In-process research and development.......................... 25,000
Goodwill..................................................... 1,071,000
Deferred tax liability....................................... (94,000)
----------
Total purchase price allocated............................. $1,241,000
==========
</TABLE>

10. Restructuring Costs

During the quarter ended September 29, 2000, Seagate Software IMG incurred
$573,000 of restructuring charges. The charges relate to the closure of eight
offices in Europe and are part of a restructuring plan announced in September
2000 to consolidate the European sales organization into fewer office
locations. The charges primarily consisted of costs related to the termination
of office leases and other related closure costs, as well as severance and
benefits due to nine sales and marketing employees who were terminated in
September 2000. At September 29, 2000, the $573,000 was included in accrued
expenses and is expected to be paid by the quarter ending March 30, 2001. No
restructuring charges were incurred during the quarter ended October 1, 1999.

During fiscal 2000 Seagate Software IMG incurred $1.3 million of
restructuring charges for termination of excess personnel as Seagate Software
IMG realigned its resources to better manage and control its business. The
charges resulted from a company-wide restructuring plan announced in October
1999 and were comprised of charges for excess personnel related to severance
and benefits paid to approximately 125 employees from various locations and
departments, including direct sales force personnel, who were terminated on
October 23, 1999. The decline in our direct sales force as part of this
restructuring contributed to the decline in revenues during fiscal 2000
compared to fiscal 1999. The restructuring charges were paid during fiscal 2000
and no amounts were outstanding as of June 30, 2000.

11. Income Taxes

Seagate Software IMG is included in the consolidated federal and certain
combined and consolidated foreign and state income tax returns of Seagate
Technology. Seagate Technology and Seagate Software IMG have entered into a tax
sharing agreement (the "Tax Allocation Agreement") pursuant to which Seagate
Software IMG computes hypothetical tax returns as if Seagate Software IMG was
not joined in consolidated or combined returns with Seagate Technology. Seagate
Software IMG must pay Seagate Technology the positive amount of any such
hypothetical taxes. If the hypothetical tax returns show entitlement to
refunds, including any refunds attributable to a carryback, then Seagate
Technology will pay Seagate Software IMG the amount of

F-19
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

such refunds. At the end of fiscal 2000 and fiscal 1999 there were $67.0
million and $762,000 of inter-company tax related balances due to Seagate
Software IMG from Seagate Technology that were offset against amounts due to
Seagate Technology under the Revolving Loan Agreement (note 2).

The provision for (benefit from) income taxes consisted of the following:

<TABLE>
<CAPTION>
For the years ended
---------------------------------------
June 30, 2000 July 2, 1999 July 3, 1998
------------- ------------ ------------
In thousands
<S> <C> <C> <C>
Current Tax Expense (Benefit)
Federal.......................... $(46,977) $(3,646) $1,915
State............................ (7,440) (1,694) (195)
Foreign.......................... $ (491) $ 2,814 7,080
-------- ------- ------
Total Current Tax Expense
(Benefit)................... $(54,908) $(2,526) 8,800
-------- ------- ------
Deferred Tax Expense (Benefit)
Federal.......................... (139) -- --
State............................ (8) -- --
Foreign.......................... -- -- --
-------- ------- ------
Total Deferred Tax Expense
(Benefit)................... (147) -- --
-------- ------- ------
Provision for (benefit from) Income
Taxes............................ $(55,055) $(2,526) $8,800
======== ======= ======
</TABLE>

For purposes of the historical financial statements, the benefit from
income taxes has been computed on a separate return basis, except that the tax
benefits of certain of Seagate Software IMG's tax losses and credits were
recognized by Seagate Software IMG on a current basis if such losses could be
utilized by Seagate Technology in its tax returns.

Loss before income taxes consisted of the following:

<TABLE>
<CAPTION>
For the years ended
---------------------------------------
June 30, 2000 July 2, 1999 July 3, 1998
------------- ------------ ------------
In thousands
<S> <C> <C> <C>
United States....................... $(271,991) $(109,095) $(20,005)
Foreign:
Canada............................ (4,042) 9,668 14,944
Europe............................ 116 750 (459)
Other............................. (300) (224) 1,061
--------- --------- --------
$(276,217) $ (98,901) $ (4,459)
========= ========= ========
</TABLE>

The pro forma information assuming a tax benefit based on a separate return
basis is as follows:

<TABLE>
<CAPTION>
For the
year ended
-------------
June 30, 2000
-------------
<S> <C>
Loss before income taxes....................................... $(276,217)
Provision for (benefit from) income taxes...................... (491)
---------
Net loss....................................................... $(275,726)
=========
</TABLE>

F-20
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

The income tax benefits related to the exercise of certain employee stock
options increased amounts due from Seagate Technology pursuant to the Tax
Allocation Agreement and were credited to additional paid-in capital. Such
amounts approximated $109,000, $22,000 and $3,000 in fiscal 2000, fiscal 1999
and fiscal 1998, respectively.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of Seagate Software IMG's deferred tax assets and liabilities were
as follows:

<TABLE>
<CAPTION>
For the years ended
--------------------------
June 30, 2000 July 2, 1999
------------- ------------
In thousands
<S> <C> <C>
Deferred Tax Assets
Receivable reserves.............................. 1,953 1,158
Inventory valuation accounts..................... 141 68
Accrued compensation and benefits................ 802 523
Depreciation..................................... 75 (24)
Accrued expenses not currently deductible........ 1,300 (28)
Goodwill and other intangibles................... 31,754 37,322
Foreign net operating loss carryforwards......... 855 3,579
Tax credit carryforwards......................... -- 7,602
Other............................................ 1,421 1,014
-------- --------
Total Deferred Tax Assets...................... 38,301 51,214
Valuation allowance.............................. (38,301) (51,214)
-------- --------
Net Deferred Tax Assets........................ -- --
-------- --------
Deferred Tax Liabilities
Goodwill and other intangibles................... 381 234
-------- --------
Net Deferred Tax Liabilities..................... $ 381 $ 234
======== ========
</TABLE>

A valuation allowance has been provided for the deferred tax assets as of
the end of fiscal 2000 and fiscal 1999. Realization of the deferred tax assets
is dependent on future earnings, the timing and amount of which are uncertain.
In addition, the net operating loss and tax credit carryforwards of acquired
subsidiaries are subject to further limitations on utilization due to the
"change in ownership" provisions of Internal Revenue Code Section 382 and the
"separate return limitation year" rules of the federal consolidated return
regulations. The valuation allowance decreased by $12.9 million in fiscal 2000
and increased by $13.6 million in fiscal 1999 and $9.0 million in fiscal 1998.

As of June 30, 2000, Seagate Software IMG had foreign net operating loss
carryforwards of approximately $2.8 million that start expiring in fiscal 2004
if not used to offset future taxable income.

F-21
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

The reconciliation between the provision for (benefit from) income taxes at
the U.S. statutory rate and the effective rate are summarized as follows:

<TABLE>
<CAPTION>
For the years ended
---------------------------------------
June 30, 2000 July 2, 1999 July 3, 1998
------------- ------------ ------------
In thousands
<S> <C> <C> <C>
Provision (benefit) at U.S.
statutory rate................... $(95,765) $(34,615) $(1,562)
State income taxes (benefit), net.. (4,191) (2,371) (557)
Foreign income taxes (benefit) in
excess of the U.S. statutory
rate............................. 1,229 109 1,816
Non-deductible compensation
expense.......................... 56,734 18,019 --
Valuation allowance................ (12,913) 13,631 9,075
Other individually immaterial
items............................ (149) 2,701 28
-------- -------- -------
$(55,055) $ (2,526) $ 8,800
======== ======== =======
</TABLE>

Seagate Software IMG recorded a $0.7 million benefit from income taxes at
an effective rate of 25% for the quarter ended September 29, 2000 compared with
a $8.8 million benefit from income taxes at an effective rate of 65% for the
quarter ended October 1, 1999. The effective rate used to record the benefit
from income taxes for the quarter ended September 29, 2000 was less than the
U.S. federal statutory tax rate primarily due to non-deductible amortization.
The effective rate used to record the benefit from income taxes for the quarter
ended October 1, 1999 was greater than the U.S. federal statutory tax rate
primarily due to losses sustained in foreign jurisdictions where the foreign
tax rate exceeds the U.S. federal statutory tax rate and a decrease in the
valuation allowance for deferred tax assets for tax attributes sold to Seagate
Technology pursuant to the Tax Allocation Agreement.

12. Net Loss Per Share

Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings
per Share", requires the disclosure of basic and diluted earnings (losses) per
share. Prior to August 24, 1999, Seagate Software IMG had no outstanding share
capital. Seagate Software IMG issued 1,000 shares of common stock to Seagate
Technology for aggregate proceeds of $1,000 on August 24, 1999. On November 16,
1999, Seagate Software Holdings contributed the IMG business to Seagate
Software IMG in exchange for 75,000,000 shares of Seagate Software IMG common
stock. Basic loss per common share has been computed using the weighted average
number of common stock outstanding during each of the periods presented, with
the initial 1,000 and 75,000,000 shares being treated as outstanding for all
reporting periods. Diluted loss per share is computed using the weighted
average number of shares of common stock outstanding during each of the periods
presented assuming exercise of options to purchase common stock, with the
initial 1,000 and 75,000,000 shares being treated as outstanding for all
reporting periods. Options to purchase common stock were excluded from the
computation of diluted net loss per share, as their effect is antidilutive.

F-22
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

Below is a reconciliation of the numerator and denominator used to
calculate net loss per share (in thousands, except share and per share data):

13. Stockholders' Equity

Seagate Software IMG's authorized capital stock consists of 150,000,000
shares of common stock, $0.001 par value per share. No dividends have been
declared or paid to date by Seagate Software IMG.

1999 and 2000 Stock Option Plans. The Seagate Software IMG's 1999 and 2000
Stock Option Plans ("IMG Plans") provides for the issuance of incentive and
nonstatutory stock options to employees, directors and consultants of Seagate
Software IMG, its parent and subsidiaries.

1999 Stock Option Plan. As of June 30, 2000, Seagate Software IMG had
reserved 22,500,000 shares under the 1999 Stock Option Plan. Options granted
under this Plan are granted at fair market value, expire ten years from the
date of the grant and vest over 48 months, with 25% vesting on the first
anniversary of the date of grant. As of June 30, 2000, 8,626,879 options were
outstanding under the 1999 stock option plan.

2000 Stock Option Plan. As of June 30, 2000, Seagate Software IMG had
reserved 200,000 shares under the 2000 Stock Option Plan. Options granted under
this Plan are granted at fair market value, expire ten years from the date of
grant and become fully vested and exercisable immediately prior to a merger or
asset sale, other than the Sale of Seagate Technology described in note 20, or
on the date upon an initial public offering of Seagate Software IMG common
stock is declared effective by the United States Securities and Exchange
Commission. Compensation expense will have to be recognized upon vesting of
these options as all of the options under this plan have been granted to
employees of our parent or another subsidiary within the consolidated group. As
of June 30, 2000, 161,450 options were outstanding under the 2000 stock option
plan.

Options under the 1999 and 2000 Stock Option Plans were granted at an
exercise price equal to the fair market value of Seagate Software IMG's common
stock on the grant date, as determined by our Board of Directors.

F-23
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

Prior to fiscal 2000, employees, directors and consultants of Seagate
Software IMG participated in Seagate Software Holdings' 1996 Stock Option Plan
(the "Holdings Plan"). Under the Holdings Plan, incentive or nonstatutory stock
options were issued to employees, directors and consultants of Seagate Software
Holdings, its parent and subsidiaries. Seagate Software Holdings had reserved a
total of 16,600,000 shares under the plan. Options granted under the Holdings
Plan were granted at fair market value, expired 10 years from the date of the
grant and vested equally over 48 months. During fiscal 1999, certain of these
options were exchanged for Seagate Technology common stock, (see note 9), and
in October 1999, the remaining options outstanding were accelerated, vested in
full and exercised. In connection with the merger of Seagate Software Holdings
and Seagate Daylight Merger Corp., the Holdings Plan was terminated. The SFAS
123 pro forma information disclosed below for fiscal 1999 and fiscal 1998 were
based on the Holdings Plan.

Following is a summary of stock option activity from the inception of the
Seagate Software IMG stock option plans through fiscal 2000:

<TABLE>
<CAPTION>
Options Outstanding
------------------------------
Number of
Common Shares Weighted Average
Issuable Exercise Price
------------- ----------------
<S> <C> <C>
Balance at July 2, 1999................... 0 0.00
Granted................................. 9,501,899 4.00
Exercised............................... (1,050) 4.00
Canceled................................ (712,520) 4.00
---------
Balance at June 30, 2000.................. 8,788,329 4.00
=========
</TABLE>

Options available for grant were 13,910,621 as of the end of fiscal 2000.
The following tables summarize information about options outstanding at June
30, 2000.

<TABLE>
<CAPTION>
Exercisable
Options Outstanding Options
-------------------------------------------- ------------------
Weighted Average Weighted Weighted
Remaining Average Average
Exercise Number of Contractual Life Exercise Number of Exercise
Price Shares (in years) Price Shares Price
-------- --------- ---------------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
$4.00 8,788,329 9.54 $4.00 40,600 $4.00
--------- ------
Total.......... $4.00 8,788,329 9.54 $4.00 40,600 $4.00
========= ======
</TABLE>

Pro Forma Information. In October 1995, the Financial Accounting Standards
Board issued SFAS 123. SFAS 123 provides an alternative to APB 25 and requires
additional disclosures. Seagate Software IMG has elected to follow APB 25 in
accounting for stock options granted. Under APB 25, Seagate Software IMG
generally recognized no compensation expense with respect to such options.

SFAS 123 requires Seagate Software IMG to present pro forma information
regarding net income and earnings per share for stock options granted after
June 30, 1995 as if Seagate Software IMG had accounted for its stock options
under the fair value method of SFAS 123. The fair value of Seagate Software
IMG's stock options was estimated using a Black-Scholes option valuation model.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, the Black-Scholes model requires the input of
highly subjective assumptions, including the expected stock price volatility.
Because Seagate Software IMG's stock options granted to

F-24
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

employees have characteristics significantly different from those of exchange-
traded options (and are not fully transferable) and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the Black-Scholes model does not necessarily provide a
reliable single measure of the fair value of its stock options granted to
employees.

The fair value of Seagate Software IMG's stock options granted to employees
was estimated assuming no expected dividends and the following weighted average
assumptions:

<TABLE>
<CAPTION>
Seagate Software IMG Incentive Seagate Technology Employee
Stock Option Plan Shares Stock Purchase Plan Shares
----------------------------------- -----------------------------------
Fiscal 2000 Fiscal 1999 Fiscal 1998 Fiscal 2000 Fiscal 1999 Fiscal 1998
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Expected life (in
years)................ 1.97 3.31 3.67 .50 .50 .56
Risk-free interest
rate.................. 6.2% 5.2% 5.7% 5.7% 4.6% 5.5%
Volatility.............. .95 .68 .55 .78 .80 .63
</TABLE>

The weighted average fair value of stock options granted under Seagate
Software IMG's 1999 Stock Option Plan was $2.83 per share. The weighted average
fair value of shares granted under the Purchase Plan were $11.47, $10.18 and
$12.03 per share in fiscal 2000, fiscal 1999 and fiscal 1998, respectively. The
weighted average purchase price of shares granted under the Purchase Plan was
$23.38, $22.72 and $26.99 per share in fiscal 2000, fiscal 1999 and fiscal
1998, respectively.

For purposes of pro forma disclosures, the estimated fair value of the
options was amortized over the options' vesting period (for stock options) and
over the six-month purchase period for stock purchases under the Purchase Plan.
Seagate Software IMG's pro forma information follows, in thousands:

<TABLE>
<CAPTION>
For the years ended
---------------------------------------
June 30, 2000 July 2, 1999 July 3, 1998
------------- ------------ ------------
<S> <C> <C> <C>
Pro forma net loss................. $(225,973) $(96,956) $(14,319)
Pro forma net loss per common
share............................ $ (3.01) $ (1.29) $ (0.19)
</TABLE>

The effects on pro forma disclosures of applying SFAS 123 are not likely to
be representative of the effects on pro forma disclosures of future years as no
shares were issued under the IMG Plan prior to November 1999.

14. Common Stock Eligible for Repurchase

As of September 29, 2000, a former employee and two directors of Seagate
Software IMG exercised a combined total of 226,050 options to purchase common
stock under the 1999 Stock Option Plan. At September 29, 2000, 1,050 shares
were vested and 225,000 shares were unvested. At the option of Seagate Software
IMG and within 30 days of termination, the unvested shares may be repurchased
at the employee's original purchase price. As of September 29, 2000, there were
225,000 shares eligible for repurchase with a balance and a repurchase price of
$900,000.

15. Business Segment and Geographic Information

Seagate Software IMG adopted Statement of Financial Accounting Standards
No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information", in fiscal 1999. SFAS 131 establishes standards for reporting
information about operating segments.

F-25
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

Seagate Software IMG operates in a single industry segment, enterprise
information management. Seagate Software IMG's products and services are sold
worldwide, through direct, OEM and distributor channels. Within the segment,
the chief operating decision maker, Seagate Software IMG's chief executive
officer, evaluates the performance of the business based upon revenues from
product and services, revenues by geographic regions and revenues by product
channels. The chief executive officer does not receive discrete financial
information about asset allocation, expense allocation or profitability from
the business products or maintenance, support and services.

Product and services revenues (in thousands):

<TABLE>
<CAPTION>
For the quarters ended For the years ended
------------------------ --------------------------
September 29, October 1, June 30, July 2, July 3,
2000 1999 2000 1999 1998
------------- ---------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Licensing revenues...... $22,958 $15,163 $ 74,182 $ 92,013 $ 81,246
Maintenance, support and
other................. 13,946 12,714 52,336 49,744 34,706
------- ------- -------- -------- --------
Total revenues........ $36,904 $27,877 $126,518 $141,757 $115,952
======= ======= ======== ======== ========

Geographic revenues (in thousands)(1),(2):

<CAPTION>
For the quarters ended For the years ended
------------------------ --------------------------
September 29, October 1, June 30, July 2, July 3,
2000 1999 2000 1999 1998
------------- ---------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
United States........... $26,135 $17,811 $ 83,080 $ 86,945 $ 78,932
Europe.................. 6,634 6,823 28,570 38,625 25,760
Other................... 4,135 3,243 14,868 16,187 11,260
------- ------- -------- -------- --------
Total revenues........ $36,904 $27,877 $126,518 $141,757 $115,952
======= ======= ======== ======== ========

Channel revenues (in thousands):

<CAPTION>
For the quarters ended For the years ended
------------------------ --------------------------
September 29, October 1, June 30, July 2, July 3,
2000 1999 2000 1999 1998
------------- ---------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Direct.................. $22,993 $17,356 $ 74,760 $ 85,773 $ 69,908
Distribution............ 11,572 8,196 40,985 44,299 38,953
OEM..................... 2,339 2,325 10,773 11,685 7,091
------- ------- -------- -------- --------
Total revenues........ $36,904 $27,877 $126,518 $141,757 $115,952
======= ======= ======== ======== ========
</TABLE>

F-26
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

Long-lived assets (in thousands)(3) as of:

<TABLE>
<CAPTION>
September 29, June 30, July 2,
2000 2000 1999
------------- -------- -------
(unaudited)
<S> <C> <C> <C>
United States................................ $ 5,806 $ 6,154 $ 8,347
Canada....................................... 7,044 7,254 4,904
Other........................................ 1,129 1,226 1,254
------- ------- -------
Total long-lived assets.................... $13,979 $14,634 $14,505
======= ======= =======
<CAPTION>
September 29, June 30, July 2,
2000 2000 1999
------------- -------- -------
(unaudited)
<S> <C> <C> <C>
Total long-lived assets...................... $13,979 $14,634 $14,505
Other assets, including current.............. 58,824 56,646 65,315
------- ------- -------
Total assets............................... $72,803 $71,280 $79,820
======= ======= =======
</TABLE>
--------
(1) Revenues are attributed to geographic regions based on the location of
the customer.
(2) Europe includes South Africa and the Middle East.
(3) Reconciliation to total assets reported (in thousands).

In fiscal 2000, fiscal 1999 and fiscal 1998, revenues from one third-party
customer, Ingram, accounted for more than 10% of consolidated revenues for a
total of $25.3 million, $18.3 million and $16.8 million, respectively, and $8.3
million and $5.3 million in the fiscal quarters ended September 29, 2000 and
October 1, 1999, respectively.

16. New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements", which was amended by SAB 101A and SAB 101B in March 2000 and June
2000, respectively. SAB 101 provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the SEC. All
registrants are expected to apply the accounting and disclosures described in
SAB 101. Seagate Software IMG is required to adopt SAB 101 in the fourth
quarter of fiscal 2001. Seagate Software IMG is still assessing the impact of
SAB 101 on its consolidated and combined results of operations, financial
position and cash flows.

17. Commitments

Leases. Seagate Software IMG leases its property, facilities and equipment
under non-cancelable lease agreements. Facility leases expire at various dates
through 2007 and contain various provisions for rental adjustments. The leases
require Seagate Software IMG to pay property taxes, insurance and normal
maintenance costs. Seagate Software IMG also occupies certain facilities owned
by Seagate Technology. Future minimum payments for operating leases were as
follows at June 30, 2000, in thousands:

<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
2001............................... $ 5,506
2002............................... 4,812
2003............................... 4,080
2004............................... 3,423
2005............................... 2,365
After 2005......................... 2,418
-------
$22,604
=======
</TABLE>

F-27
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

Total rent expense for all facility equipment operating leases was
approximately $5.7 million, $5.7 million and $3.2 million for fiscal 2000,
fiscal 1999 and fiscal 1998, respectively, and $1.6 million and $1.4 million
for the quarters ended September 29, 2000 and October 1, 1999, respectively.

Non-cancelable Capital Obligations. As of June 30, 2000 there were no
outstanding non-cancelable capital obligations.

Canadian Registered Retirement Savings Program. In January 1999, Seagate
Software IMG began sponsoring a tax deferred registered retirement savings
program for its Canadian employees. Employees voluntarily contribute to
registered retirement savings accounts and Seagate Software IMG contributes 50%
of the amounts contributed by the employees, up to a maximum of $1,667 (CAD
$2,500) per employee or 6% of the individual employee's salary, whichever is
less. Expenses related this program were $530,000 in fiscal 2000 and $215,000
in fiscal 1999.

18. Contingencies

On November 10, 1997, Vedatech commenced an action in the High Court of
Justice Chancery Division in the United Kingdom against Seagate Software
Information Management Group Ltd., a wholly owned subsidiary of Seagate
Software IMG, claiming breach of an oral agreement and infringement of a
Vedatech U.K. copyright in the Japanese translation of one of Seagate Software
IMG's products and is seeking monetary and injunctive relief. No specific
damage amount has yet been claimed with the exception of $240,000
((Yen)26.0 million) for unpaid invoices in connection with the quantum meruit
claim. Vedatech seeks to enjoin Seagate Software IMG from infringing the U.K.
copyright and seeks forfeiture to Vedatech of all infringing software copies.
Seagate Software IMG has hired local counsel in the U.K., reviewed documents,
conducted interviews and participated in the discovery process. On August 22,
2000, Vedatech requested and obtained permission from the court to amend its
action to include claims for unjust enrichment, unlawful interference and
quantum merit. Seagate Software IMG has deposited with the court an amount
equal to $200,000 in relation to the quantum meruit claim. Seagate Software IMG
has filed an amended response. Discovery is ongoing, and the court has
expressed its intent to set the matter for trial on June 5, 2001. With the
exception of the quantum meruit claim, Seagate Software IMG believes the
complaint has no merit, and intends vigorously to defend the action. However,
if an unfavorable outcome were to arise, there can be no assurance that such
outcome would not have a material adverse affect on Seagate Software IMG's
liquidity, financial position or results of operations. The outcome of this
matter and amount of related claims are not determinable at this time

In addition to the foregoing, Seagate Software IMG is subject to other
litigation in the ordinary course of our business. While Seagate Software
believes that the ultimate outcome of these matters will not have a material
adverse effect on Seagate Software IMG, the outcome of these matters is not
determinable and negative outcomes may adversely affect Seagate Software IMG's
financial position, liquidity, or results of operations.

19. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
For the quarters ended For the years ended
------------------------ ------------------------
September 29, October 1, June 30, July 2, July 3,
2000 1999 2000 1999 1998
------------- ---------- -------- ------- -------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C>
Cash Transactions:
Cash paid for interest.... $12 $394 $1,481 $ 128 $ 253
Cash paid for income
taxes, net of refunds... -- $341 $1,045 $12,951 $6,756
</TABLE>

F-28
<PAGE>

SEAGATE SOFTWARE INFORMATION MANAGEMENT GROUP HOLDINGS, INC.

20. Sale of Seagate Technology

On March 29, 2000, Seagate Technology, Seagate Software Holdings and Suez
Acquisition Company (Cayman) Limited ("Old SAC"), an entity affiliated with,
among others, Silver Lake Partners and Texas Pacific Group, entered into a
Stock Purchase Agreement (the "Stock Purchase Agreement") and Seagate
Technology, VERITAS and a wholly owned subsidiary of VERITAS entered into an
Agreement and Plan of Merger and Reorganization (the "Merger Agreement"). The
transaction is referred to as the "SAC Transaction." The stockholders of each
of VERITAS and Seagate Technology approved the Merger and the SAC Transaction,
as the case may be, on November 21, 2000. The SAC Transaction contemplated by
the Stock Purchase Agreement and Merger Agreement were completed on November
22, 2000. Old SAC assigned all of its rights under the Stock Purchase Agreement
to New SAC, a Cayman Islands limited corporation ("SAC"), in connection with
the closing of the SAC Transaction.

Under the Stock Purchase Agreement, SAC has purchased for cash, all of the
operating assets of Seagate Technology and its consolidated subsidiaries,
including Seagate Technology's disc drive, tape drive and software businesses
and operations, including Seagate Software IMG and certain cash reserves. Upon
completion of the SAC Transaction, the 75,001,000 common shares of Seagate
Software IMG formerly held by Seagate Software Holdings were assigned to
Seagate Software (Cayman) Holdings, a wholly owned subsidiary of SAC organized
as a Cayman Islands limited corporation.

The SAC transaction resulted in a change of control which may require
pushdown accounting. Seagate Software IMG may be required to reflect the fair
value of its tangible and intangible assets and liabilities as at the close of
the transaction.

The Tax Allocation Agreement between Seagate Technology and Seagate
Software IMG was terminated on November 22, 2000, and Seagate Technology and
Seagate Software IMG will no longer file federal income tax returns on a
consolidated basis. Therefore, Seagate Technology will not benefit from nor
will it reimburse Seagate Software IMG pursuant to the Tax Allocation Agreement
for tax losses sustain by Seagate Software
IMG subsequent to consummation of the transaction. In prior periods, Seagate
Software IMG has generated substantial cash payments from its tax losses
utilized by Seagate Technology, which have been used to reduce its obligations
to Seagate Technology under the Revolving Loan Agreement. As a result of the
termination of the Tax Allocation Agreement, Seagate Software IMG may not be
able to convert any future tax losses into cash.

Seagate Software IMG relies on a revolving loan with Seagate Technology
LLC, which is now a wholly-owned subsidiary of SAC, to fund a portion of its
operating cash needs. The Revolving Loan Agreement continues in effect
subsequent to the closing of the SAC transaction on November 22, 2000. Seagate
Software IMG may require additional financing through the end of fiscal 2002.
Seagate Software is in the process of negotiating additional financing with
Seagate Technology LLC through the end of fiscal 2002. Should additional
financing not be available from Seagate Technology LLC at terms that are
satisfactory to Seagate Software IMG and Seagate Technology LLC, Seagate
Software IMG may seek additional equity and financing from other sources.
However, as a result of the SAC Transaction, Seagate Software IMG pledged a
majority of its assets to guarantee the debt used to finance the SAC
Transaction. As a result, Seagate Software IMGs' ability to raise additional
secured debt from other sources may be limited.

F-29
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