KOMAG INC /DE/, 424B1, 1995-09-15

KOMAG INC /DE/
424B1, 1995-09-15
MAGNETIC & OPTICAL RECORDING MEDIA

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<PAGE> 1

LOGO
1,750,000 SHARES

KOMAG, INCORPORATED

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

------------------------

The last reported sale price of the Common Stock, which is quoted under the
symbol "KMAG", on the Nasdaq National Market on September 14, 1995 was $73.25
per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" AT PAGE 5 FOR CERTAIN FACTORS RELEVANT TO AN INVESTMENT
IN THE COMMON STOCK OFFERED HEREBY.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2)
------------------ ------------------ ------------------
<S> <C> <C> <C>
Per Share....................... $73.00 $3.10 $69.90
Total(3)........................ $127,750,000 $5,425,000 $122,325,000
</TABLE>

---------------

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting estimated expenses of $250,000 payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 262,500 shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount, and proceeds to the Company will be $146,912,500,
$6,238,750, and $140,673,750, respectively. See "Underwriting."
------------------------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the
certificates for the shares will be ready for delivery in New York, New York, on
or about September 20, 1995.

GOLDMAN, SACHS & CO.
MONTGOMERY SECURITIES
HAMBRECHT & QUIST
------------------------

The date of this Prospectus is September 15, 1995.
<PAGE> 2

AVAILABLE INFORMATION

Komag, Incorporated ("Komag" or the "Company") is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files annual and quarterly reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information may be
inspected and copies of such materials may be obtained at prescribed rates at
the Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, as well as the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Common Stock of the Company is quoted on the Nasdaq National Market. Reports
and other information concerning the Company may be inspected at the offices of
the Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.

This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (the "Registration Statement") of which this
Prospectus is a part, including exhibits relating thereto, which has been filed
with the Commission under the Securities Act of 1933, as amended (the "Act"), in
Washington, D.C. Statements made in this Prospectus as to the contents of any
referenced contract, agreement or other document are not necessarily complete,
and each such statement shall be deemed qualified in its entirety by reference
thereto. Copies of the Registration Statement and the exhibits and schedules
thereto may be obtained, upon payment of the fee prescribed by the Commission,
or may be examined without charge, at the office of the Commission.

INFORMATION INCORPORATED BY REFERENCE

The following documents filed with the Commission (Commission File No.
0-16852) pursuant to the Exchange Act are incorporated herein by reference: (1)
the Company's Annual Report on Form 10-K for the fiscal year ended January 1,
1995, as amended by the Company's Report on Form 10-K/A; (2) the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended April 2, 1995 and
July 2, 1995; (3) the Company's Proxy Statement for the Annual Meeting of
Stockholders held on May 24, 1995; (4) the description of the Common Stock
contained in the Company's Registration Statement on Form 8-A filed with the
Commission on April 29, 1989; and (5) all other documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of this offering.

Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents which are incorporated herein by
reference (other than exhibits to such information, unless such exhibits are
specifically incorporated by reference into the information this Prospectus
incorporates). Requests should be directed to Komag, Incorporated, 275 South
Hillview Drive, Milpitas, California 95035, Attention: William L. Potts, Jr.,
Chief Financial Officer or by telephone at (408) 946-2300.
------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere in, or
incorporated by reference into, this Prospectus.

THE COMPANY

Komag, Incorporated ("Komag" or the "Company") designs and manufactures
thin-film media ("disks"), the primary storage medium for digital data in
computer hard disk drives. Komag believes it is recognized as the leader in the
thin-film media market. The Company's business strategy relies on the
combination of advanced technology and cost-effective, high volume manufacturing
to advance its leadership position. The Company believes that the combination of
these two capabilities is a significant competitive advantage and enables the
Company to support its customers' technically advanced, high volume product
programs. Komag's products address the high-capacity/high-performance segments
of the disk drive market and are used in products such as disk arrays, network
file servers, high-end personal computers, and engineering workstations. With
facilities in the United States, Malaysia and Japan, Komag is the world's
largest thin-film media manufacturer.

Komag's customers include both OEM disk drive manufacturers, such as
Seagate Technology, Inc., Quantum Corporation and Western Digital Corporation,
and computer systems manufacturers that produce their own disk drives, such as
Hewlett-Packard Company.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered................................. 1,750,000 Shares(1)
Common Stock to be outstanding after the offering.... 25,129,829 Shares(2)
Nasdaq National Market Symbol........................ KMAG
Use of proceeds...................................... Capital expenditures and general
corporate purposes, including working
capital. See "Use of Proceeds."
</TABLE>

---------------

(1) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(2) Based on shares outstanding as of July 2, 1995 and the 1,750,000 shares to
be offered by the Company. Excludes as of July 2, 1995, 2,909,035 shares of
Common Stock reserved for issuance under the Company's Stock Option Plans
and Employee Stock Purchase Plan. Options for 2,541,016 shares under the
Stock Option Plans were outstanding at July 2, 1995.

3
<PAGE> 4

SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)

RESULTS OF MEDIA OPERATIONS(2):

<TABLE>
<S> <C> <C> <C> <C> <C>
Net sales...................... $ 279,544 $ 334,542 $ 392,391 $ 195,475 $ 225,870
Gross profit................... 78,229 109,456 125,386 62,785 78,787
Operating income............... 47,307 67,101 76,945 38,056 48,737
Income from media operations... $ 34,914 $ 45,879 $ 58,522 $ 29,398 $ 38,241
</TABLE>

<TABLE>
<CAPTION>
JULY 2, 1995
----------------------------
ACTUAL AS ADJUSTED(3)
--------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................................ $ 121,371 $ 243,446
Net property, plant & equipment................................ 265,438 265,438
Long-term debt (less current portion).......................... 11,667 11,667
Stockholders' equity........................................... 380,933 503,008
Total assets................................................... $ 481,960 $ 604,035
</TABLE>

---------------

(1) The Company previously supplied thin-film recording heads for hard disk
drives through Dastek, Inc., which has ceased operations. Consolidated
results of operations for 1992 and 1993 include the results of Dastek.
Consolidated results of operations for 1994 and the first six months of
1995 do not include any Dastek results.

(2) Results of media operations exclude Dastek, Inc.'s operating results for
fiscal 1992 and 1993 and the related restructuring charge in fiscal 1993.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

(3) Adjusted to reflect the issuance and sale of the 1,750,000 shares offered
hereby and the receipt of the net proceeds therefrom (assuming the
Underwriters' over-allotment option is not exercised). See "Use of
Proceeds" and "Capitalization."

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<PAGE> 5

RISK FACTORS

In addition to the other information in this Prospectus and incorporated
herein by reference, the following factors should be carefully considered in
evaluating the Company and its business before purchasing shares of Common Stock
offered hereby.

RAPID TECHNOLOGICAL CHANGE

The thin-film disk industry has been characterized by rapid technological
developments, increasingly shorter product life cycles, and price erosion. The
Company believes that its future success depends, in large measure, on its
ability to continually improve existing process technologies and to develop and
implement new process technologies in a timely manner. Such technologies must
support cost-effective, high volume production of thin-film disks that meet the
ever-advancing customer requirements for enhanced magnetic recording performance
(characterized in part by coercivity level, magnetization thickness product, and
noise/overwrite capability), improved mechanical performance (characterized in
part by glide height, stiction, wear, and corrosion), and reduced defect levels
(characterized in part by quantity and size). Although the Company has a
significant, ongoing research and development effort to advance its process
technologies and the resulting products, there can be no assurance that the
Company will be able to develop and implement such technologies in a timely
manner in order to compete effectively against competitors' products and/or
entirely new data storage technologies. The Company's results of operations
would be materially adversely affected if the Company's efforts to advance its
process technologies were not successful or if the technologies that the Company
had chosen not to develop were proven to be viable competitive alternatives. In
addition, protection of technology through patents and other forms of
intellectual property rights in technically sophisticated fields is commonplace.
There can be no assurance that others have not or will not perfect such
intellectual property rights and either enforce those rights to prevent the
Company from practicing certain technologies or demand royalty payments from the
Company in return for practicing those technologies, which may materially
adversely affect the Company's results of operations. The Company reviews, on a
routine basis, patent issuances in the U.S. and patent applications which are
published in Japan, and became aware of a Japanese patent application which, if
issued in identical form in Japan or, if there exists a corresponding
application in the U.S., if issued in the U.S., could give rise to a claim of
infringement against the Company. While the Company has not investigated this
Japanese patent application in detail, it believes it is unlikely that a valid
patent of sufficient breadth to materially adversely affect the Company's
business will be issued in either Japan or the U.S. However, there can be no
assurance that a broad patent will not issue from this application, which if
asserted against the Company and upheld may apply to a significant portion of
the Company's products and would have a material adverse effect on the Company's
business.

MANUFACTURING IMPROVEMENTS AND CAPACITY EXPANSION

Inasmuch as the Company is operating its disk production lines at or near
full capacity, future sales and earnings growth will depend on the successful
expansion of the Company's manufacturing capacity. Such capacity expansion may
be accomplished through additional gains in disk output from existing production
lines and through the installation of new production lines at existing and new
manufacturing facilities. To improve disk output from existing production lines,
the Company strives to reduce process cycle times, improve manufacturing yields,
and increase equipment utilization rates. Additionally, the Company is upgrading
certain older existing production lines to a new design standard that should
enhance the production capabilities of these older machines. Should the
Company's efforts in these areas not produce the desired results, the Company's
rate of growth may be constrained or curtailed. Furthermore, should the Company
experience a deterioration in manufacturing performance or a delay or unforeseen
outcome arising from the machine upgrade program, the Company's results of
operations would be materially adversely affected.

The Company currently plans to add new production lines at its existing
manufacturing plant in Penang, Malaysia during 1995 and the first half of 1996
that will fully utilize all available floor space at this facility. Construction
of a new manufacturing facility was recently commenced in the east Malaysian
state of Sarawak. This facility is expected to become operational in the first
half of 1996. There can be no assurance that the Company's additional production
lines will be installed as scheduled or will experience the high levels of
manufacturing efficiencies attained by the Company's existing production lines.
The

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<PAGE> 6

Company must attract, train, motivate and retain highly-trained and dedicated
employees, particularly at the Company's planned start-up operations in Sarawak.
Manufacturing and other issues which may occur in connection with the
commencement and subsequent expansion of operations in any location and in
particular Sarawak, a business location with limited experience in advanced
manufacturing, could materially adversely affect the Company's results of
operations.

The Company has been operating all of its manufacturing facilities at or
close to capacity during the last year. Based upon its forecast of continued
high growth in demand for magnetic media, the Company has developed plans to
increase its production capacity under a schedule that is substantially more
aggressive than its past expansion plans. Implementation of this plan would
entail parallel expansion at multiple locations rather than serial expansion one
location at a time, thus requiring precise manufacturing planning. Successful
execution of this parallel expansion will require timely identification and
acquisition of appropriate sites, receipt of requisite approvals, construction
and equipping of facilities, recruitment and retention of a high quality
workforce, and achievement of satisfactory manufacturing results on a scale
greater than the Company's prior expansions. There can be no assurance that the
Company will successfully manage this risk. In addition, should actual demand
for the Company's products not meet the Company's forecast, and not absorb
existing or planned additional capacity, the fixed costs and operating expenses
related to unused capacity would materially adversely affect the Company's
results of operations.

DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS; DEPENDENCE ON HARD DISK DRIVE
INDUSTRY

The Company's sales are concentrated in a small number of customers due to
the high volume requirements of the dominant disk drive manufacturers and their
tendency to rely on a few suppliers because of the close interrelationship
between media performance and disk drive performance. Net sales to major
customers in the first half of 1995 were as follows: Seagate Technology,
Inc.--42%, Quantum Corporation--24%, Hewlett-Packard Company--21% and Western
Digital Corporation--8%. Given the relatively small number of high performance
disk drive manufacturers, the Company expects that it will continue its
dependence on a very limited number of customers. The Company's largest
customer, Seagate Technology, Inc., produces a portion of its thin-film disk
requirements internally and has recently announced a long term purchase
commitment with one of the Company's competitors. Seagate has also announced an
expansion of its facilities and could further expand internal production of
thin-film disks, either through direct investment or through the acquisition of
one of the Company's competitors, and could increase or execute additional
long-term purchase commitments with one or more of the Company's competitors.
Other customers and potential customers have, or could adopt, similar
strategies. Depending on the overall growth in market demand for disk products,
such actions could result in the reduction or cessation of purchases from the
Company, thus materially adversely affecting the Company's results of
operations. Additionally, if one or more of the Company's customers were to
begin selling disks on the open market in direct competition with the Company,
the Company's results of operations could be further adversely affected.

The demand for the Company's high performance thin-film disks depends upon
the demand for hard disk drives and the Company's ability to provide technically
superior products at competitive prices. The high performance segment of the
hard disk drive market is characterized by short product life cycles and rapid
technological change. Failure by the Company to qualify new products and/or
successfully achieve volume manufacturing of new customer products could
adversely affect the Company's results of operations. Furthermore, the Company's
sales are generally made pursuant to purchase orders which are subject to
cancellation, modification or rescheduling without significant penalties. There
can be no assurance that the Company's current customers will continue to place
orders with the Company, that orders by existing customers will continue at the
levels of previous periods, or that the Company will be able to obtain orders
from new customers.

CAPITAL NEEDS

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<PAGE> 7

the proceeds of this offering, cash flow from operations, funds available from
existing and possibly new bank lines of credit, and existing cash balances.
However, in the event the Company continues to expand its facilities at an
aggressive rate, significant new capital will be required, necessitating
additional debt, equity or other financing. There can be no assurance that such
additional funds will be available to the Company or, if available, will be
available on favorable terms. In addition, the Company may require additional
capital for other purposes. If the Company is unable to obtain sufficient
capital, it could be required to reduce its capital equipment and research and
development expenditures, which could materially adversely affect the Company's
results of operations.

FLUCTUATIONS IN OPERATING RESULTS

The Company believes that its future operating results will continue to be
subject to quarterly variations based upon a wide variety of factors, including
the cyclical nature of the hard disk drive industry, the ability to develop and
implement new manufacturing process technologies, the ability to introduce new
products and to achieve cost-effective, high volume production in a timely
manner, changes in product mix and average selling prices, the availability and
the extent of utilization of the Company's production capacity, manufacturing
yields, prolonged disruptions of operations at any of the Company's facilities
for any reason, changes in the cost of or limitations on availability of
materials and labor, and increases in production and engineering costs
associated with initial production of new product programs.

Because the thin-film disk industry is capital intensive and requires a
high level of fixed costs, gross margins are also extremely sensitive to changes
in volume. Assuming fixed average selling prices, reductions in manufacturing
efficiency would cause declines in gross margins. Additionally, decreasing
demand for the Company's products generally results in reduced average selling
prices and/or low capacity utilization that, in turn, adversely affects gross
margins and operating results. The Company's ability to maintain average selling
prices and gross margins is dependent on its ability to produce, in volume,
products that are differentiated on the basis of technological superiority. In
1994, the Company was delayed in introducing its 1800 oersted disk products and
its rate of growth and gross margins were adversely affected. In the second
quarter, the Company achieved a record gross margin of 38.1% as a result of
increased manufacturing efficiencies coupled with strong market demand for and
an industry shortage of 1800 oersted disks. In the event that market supply
meets or exceeds demand or the Company is unable to continue to increase its
production mix of 1800 oersted products, the Company's gross margin would likely
decrease. In the longer term, the Company believes that the gross margin may not
be sustainable at the second quarter's record high levels. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Discussion of Quarterly Results of Operations" and "Quarterly
Report on Form 10-Q -- Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Fluctuations in the financial results of Asahi Komag Co., Ltd. ("AKCL"),
the Company's unconsolidated Japanese disk manufacturing joint venture, could
also impact the Company's financial performance. Equity in net income of AKCL
contributed 9.3% of the Company's 1994 consolidated net income. The Company
anticipates that AKCL's equity income will account for a smaller percentage of
1995 consolidated net income. AKCL is subject to many of the same types of risks
facing the Company. In addition, the equity income derived from AKCL may
fluctuate over time due its dependence on a more limited customer base
(Matsushita-Kotobuki Electronics Industries, Ltd. and Fujitsu Ltd. accounted for
68% and 31%, respectively, of AKCL's first half 1995 net sales), yen/dollar
exchange rate fluctuations, and further write-downs by AKCL of its investment in
Headway Technologies, Inc., a U.S.-based magneto-resistive head research and
development company.

RISK OF FOREIGN OPERATIONS

In 1994, sales to customers in the Far East, including foreign subsidiaries
of domestic companies, accounted for 51% of the Company's net sales from its
U.S. and Malaysian facilities, and the Company anticipates that international
sales will continue to represent the majority of its net sales. All of the
Company's sales are currently priced in U.S. dollars worldwide. Certain costs at
the Company's foreign manufacturing and marketing operations are incurred in the
local currency. The Company also purchases certain operating supplies and
production equipment from Japanese suppliers in yen denominated transactions.
Accordingly, the Company's operating results are subject to the risks inherent
with

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international operations, including but not limited to, compliance with or
changes in the law and regulatory requirements of foreign jurisdictions,
fluctuations in exchange rates, tariffs or other barriers, difficulties in
staffing and managing foreign operations, exposure to taxes in multiple
jurisdictions, and transportation delays and interruptions.

The Company's existing Malaysian manufacturing facility accounted for 20%
and 37% of the Company's 1994 consolidated net sales and operating income,
respectively. The Company anticipates that this operation will account for a
greater percentage of consolidated net sales and operating income in 1995.
Prolonged disruption of operations at this facility for any reason would cause
delays in shipments of the Company's products, thus materially adversely
affecting the Company's results of operations.

COMPETITION

The Company's thin-film disk products are used primarily in the
high-capacity segment of the 3 1/2-inch and 5 1/4-inch hard disk drive market,
where product performance, consistent quality and availability, taken together,
are of great competitive importance. If the technology involved in the
manufacture of thin-film disks does not continue to advance rapidly, or if the
Company is not able to keep pace with such advances, the Company may face
increased price competition from other manufacturers. Such competition could
materially adversely affect its results of operations.

Current thin-film disk competitors fall into three groups: U.S. non-captive
manufacturers, U.S. captive manufacturers, and Japan-based manufacturers.
Historically, each of these groups has supplied approximately one-third of the
worldwide thin-film disk unit output. Based upon research conducted by an
independent market research firm, the Company believes it is the leading
supplier of thin-film disks with a market share greater than twice the size of
any of the U.S. non-captive manufacturers or Japan-based manufacturers. The
Company's U.S. non-captive thin-film disk competitors include Akashic Memories
Corporation (a subsidiary of Kubota, Inc.), HMT Technology (a subsidiary of
Hitachi Metals, Ltd.) and StorMedia, Inc. Japan-based thin-film disk competitors
include Fuji Electric Company, Ltd., Mitsubishi Kasei Corp., Showa Denko K.K.
and HOYA Corporation. The U.S. captive manufacturers include IBM and OEM drive
manufacturers, such as Seagate Technology, Inc., Conner Peripherals, Inc., and
Western Digital Corporation, which manufacture disks as a part of their vertical
integration programs. To date, IBM and these OEM drive manufacturers have sold
nominal quantities of disks in the open market. However, the Company believes
any significant investments in new disk production capacity by computer or disk
drive companies, coupled with slower market growth for data storage, could
reduce the number of potential customers and increase competition for the
remaining market. Such conditions could materially adversely affect the
Company's results of operations.

The disk drive market has historically been characterized by rapid
incremental technological developments that have required substantial
improvement in disk performance. To succeed in this dynamically changing
industry, the Company must continuously advance its thin-film technology at a
pace consistent with or faster than its competitors. In addition, the Company
must capture a market share position that will insure a competitive cost
structure over the long run as these markets mature. The Company believes that
its thin-film manufacturing facility in Penang, Malaysia provides a significant
competitive cost advantage relative to most other thin-film disk manufacturers
that currently operate exclusively in the U.S. and Japan.

VOLATILITY OF STOCK PRICE

The Company's Common Stock has experienced and can be expected to
experience substantial price volatility in response to actual or anticipated
quarterly variations in operating results, announcements of technological
innovations or new products by the Company or its competitors, developments
related to patents or other intellectual property rights, developments in the
Company's relationships with its customers or suppliers, and other events or
factors. In addition, any shortfall or changes in revenue, gross margins,
earnings, or other financial results from analysts' expectations could cause the
price of the Company's Common Stock to fluctuate significantly. In recent years,
the stock market in general has experienced extreme price and volume
fluctuations, which have particularly affected the market price of many
technology companies and which have often been unrelated to the operating
performance of those companies. These broad market fluctuations may adversely
affect the market price of the Company's Common Stock. See "Price Range of
Common Stock."

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THE COMPANY

Greater processing power, more sophisticated operating systems and
application software, high-resolution graphics, and larger data bases are among
the developments that have required ever higher performance from disk drives.
For example, the first 5 1/4-inch hard disk drive, introduced in 1980, offered a
capacity of five megabytes (one million bytes is a megabyte or "MB") with a
storage density of less than ten megabits (one million bits is a megabit or
"Mb"; eight bits is one byte) per square inch. Current high-performance
3 1/2-inch drives have capacities of four gigabytes (one billion bytes is a
gigabyte or "GB") with densities typically of four hundred megabits per square
inch. Advances in component technology have been critical to improving the
performance and storage capacity of disk drives.

Today's disk drives offer this enhanced performance at a very low price as
a result of the design and manufacturing efficiencies that have been achieved
throughout the data storage industry. These price/performance considerations,
coupled with the increasing demand for digital storage, are driving the strong
unit demand for high-performance disk drives. The market for disk drives is
forecasted to grow at a compound annual growth rate of approximately 30% over
the next two years from approximately 68 million units in 1994 to approximately
116 million units in 1996, according to International Data Corporation, an
independent market research firm. As a result, the Company believes the market
for thin-film disks will grow at a comparable rate.

The Company has capitalized on its technological strength in thin-film
processes and its manufacturing capabilities to achieve the leading market
position in the thin-film media market. The Company's technological strength
stems from knowledge of materials science and an understanding of the interplay
between disks, heads and other drive components. The primary factors governing
the density of storage achievable on a disk's surface are (1) the minimum
distance at which read/write heads can reliably pass over the surface of the
disk to detect a change in magnetic polarity when reading from the disk, defined
as glide height (measured in microinches or millionths of an inch), and (2) the
strength of the magnetic field required to change the polarity of a bit of data
on the magnetic layer of a disk when writing, defined as coercivity (measured in
oersteds). The lower the glide height, the more accurately and reliably the bit
can be retrieved. The higher the coercivity of the media, the smaller the width
of the bit that can be stored. The Company's plating, polishing and texturing
processes result in a low defect, uniform surface that currently permits the
read/write heads to pass over the disk surface at glide heights as low as 1.5
microinches. The platinum-cobalt based alloy deposited on the surfaces of Komag
disks allows high coercivities with excellent low noise, magnetic
characteristics. The combination of these factors results in more data stored in
a given area on the disk surface. The Company believes that it is currently the
leading volume supplier of 1800 oersted, 1.5 microinch glide height, thin-film
media, the most advanced media presently being shipped in commercial volume.

As the glide height in advanced disk drives approaches near contact
recording levels (1.5 microinches and below), a more integrated approach in the
design and development of disks and heads is required. Komag undertook two
initiatives in 1994 to ensure that there would be close cooperation between the
Company and various head suppliers. The Company holds a minority equity position
in Headway Technologies, Inc., which is developing and manufacturing an advanced
magneto-resistive recording head. In addition, the Company entered into an
agreement with Read-Rite Corporation, a leading inductive thin-film head
manufacturer, that facilitates the exchange of advanced prototype products
between the two companies and promotes cooperation in the development of
improved disk-to-

9
<PAGE> 10

head interfaces. The higher recording densities achieved through use of
thin-film media and thin-film heads continues to enable the manufacture of
smaller, higher capacity disk drives at a lower overall cost per bit stored.

Komag's manufacturing expertise in thin-film media is evidenced by its
history of delivering reliable products in high volume. Through the utilization
of proprietary processes and techniques, the Company has the capability to
cost-effectively produce advanced disk products that exhibit uniform performance
characteristics. Such uniform performance characteristics enhance the
reliability of the drive products manufactured by the Company's customers. In
addition, these characteristics raise production yields on the customers'
manufacturing lines, which is an important cost consideration in high
performance disk drives with large component counts. Manufacturing costs are
highly dependent upon the Company's ability to effectively utilize its installed
physical capacity to produce large volumes of products at acceptable yields. To
improve yields and capacity utilization, Komag has adopted formal continuous
improvement programs at all of its worldwide operations. The Company's media
manufacturing facilities throughout the world are certified under ISO 9000, an
internationally recognized quality standard. The process technologies employed
by the Company require substantial capital investment. In addition, long lead
times to install new increments of physical capacity complicate capacity
planning. Historically, the Company has operated at or near full capacity with
favorable manufacturing yields and equipment utilization rates.

The Company currently has 18 production lines in three countries: ten in
the United States, four in Malaysia, and four at its manufacturing joint venture
in Japan. On a rotating basis for the next two years, one U.S. production line
will be out of production as it is upgraded to a new design standard. Certain
older production lines at the Japanese joint venture will also be upgraded. The
Company plans to add two additional lines during the remainder of 1995 (one each
in Malaysia and Japan) and has begun construction of a new "front end"
manufacturing facility in the east Malaysian state of Sarawak. This new facility
will manufacture plated, polished substrates that will be subsequently shipped
to the Company's facilities in the United States and Penang, Malaysia for
completion. Production at this new facility is expected to begin in the first
half of 1996. The Company also plans to add two new production lines by mid-1996
at its Penang, Malaysia facility, thus utilizing all available space at that
plant. In addition, due to strong market demand for the Company's disk products,
the Company has committed to further expand its physical production capacity in
the United States, Southeast Asia and Japan. In August 1995, the Company
announced plans to construct a new 200,000 square-foot disk manufacturing plant
in San Jose, California under a build-to-suit lease arrangement on a 13.5 acre
parcel. Production at this new plant is expected to begin during the fourth
quarter of 1996. Site selection in Southeast Asia is underway and construction
could begin within the first quarter of 1996 on a plant which will duplicate the
design of the new San Jose facility. Each of these new facilities is expected to
house six production lines. Further, two additional production lines are under
consideration at the Company's joint venture in Japan.

The Company manufacturers and sells primarily 95 mm and 130 mm disks for
3 1/2-inch and 5 1/4-inch hard disk drives, respectively. The Company sells its
disk products to independent original equipment manufacturers ("OEMs") for
incorporation into drives which are marketed under the disk drive manufacturers'
own labels. Net sales to the Company's major customers in the first half of 1995
were as follows: Seagate Technology, Inc.-42%, Quantum Corporation-24%,
Hewlett-Packard Company- 21%, and Western Digital Corporation-8%.

The Company was organized in 1983 and is incorporated in the State of
Delaware. The Company's executive offices are located at 275 South Hillview
Drive, Milpitas, California 95035 (telephone number (408) 946-2300). Current
manufacturing operations are conducted by the Company in the United States and
Malaysia as well as through two joint ventures with three Japanese manufacturing
partners. Asahi Komag Co., Ltd. ("AKCL"), a joint venture with Asahi Glass Co.,
Ltd. and Vacuum Metallurgical Company, manufactures thin-film media in Japan and
Komag Material Technology, Inc. ("KMT"), a U.S.-based joint venture with Kobe
Steel, Ltd., produces disk substrates for use in the Company's media operations.

10
<PAGE> 11

USE OF PROCEEDS

The net proceeds from the sale of securities offered hereby are
$122,075,000 ($140,423,750 if the Underwriters' over-allotment option is fully
exercised). The Company intends to use the net proceeds for capital expenditures
and general corporate purposes, including working capital. During the two-year
period of 1995 and 1996, total capital expenditures are estimated at
approximately $400 million and at July 2, 1995 the Company's current,
non-cancellable capital expenditure commitments totalled approximately $80
million. See "Risk Factors--Capital Needs." Proceeds may also be used to acquire
companies, products or technologies that complement the Company's business
should such opportunities arise. No specific acquisitions are being planned or
negotiated as of the date of this Prospectus, except that negotiations are
currently taking place whereby the Company would acquire 25% of the outstanding
common stock of Komag Material Technology, Inc. (KMT) from Kobe Steel USA
Holdings Inc. for approximately $6.75 million. Such acquisition, if completed on
these terms, as to which there can be no assurance, would bring the Company's
total ownership interest in KMT to 80%. Pending such uses, the net proceeds may
be temporarily invested in short-term obligations such as certificates of
deposit issued by banks, government obligations and money market securities.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Stock.
The Company currently intends to retain all cash for use in the operation and
expansion of its business and does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future. In addition, certain of the
Company's debt agreements limit the amount of dividend payments without the
prior consent of the lender.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "KMAG." The following table sets forth for the range of high and low
closing sales prices.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR 1993
First Quarter.................................................. $ 24 $ 17
Second Quarter................................................. 21 1/2 16 3/8
Third Quarter.................................................. 23 3/4 15 3/8
Fourth Quarter................................................. 18 14 1/8
FISCAL YEAR 1994
First Quarter.................................................. 27 5/8 15 3/4
Second Quarter................................................. 25 1/4 17 3/4
Third Quarter.................................................. 26 1/2 19 1/4
Fourth Quarter................................................. 28 5/8 24 1/8
FISCAL YEAR 1995
First Quarter.................................................. 337/16 23 1/8
Second Quarter................................................. 52 1/4 31 3/4
Third Quarter (through September 14, 1995)..................... 74 1/8 51 1/4
------ ------
</TABLE>

On September 14, 1995, the last reported sale price for the Common Stock on
the Nasdaq National Market was $73.25 per share.

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the consolidated long-term debt and
capitalization of the Company at July 2, 1995 and as adjusted to give effect to
the issuance and sale by the Company of the 1,750,000 shares of Common Stock
offered hereby, and the application of the net proceeds therefrom. The financial
data in the following table should be read in conjunction with the Company's
audited consolidated financial statements (and notes thereto) at January 1, 1995
incorporated herein by reference and the Company's unaudited consolidated
quarterly financial statements (and notes thereto) at July 2, 1995, included
elsewhere herein.

<TABLE>
<CAPTION>
AS OF JULY 2, 1995
-----------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
<S> <C> <C>
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
Current portion of long-term debt(2).......................... $ 11,357 $ 11,357
========= ============
Long-term debt, less current portion(2)....................... $ 11,667 $ 11,667
Minority interest in consolidated subsidiary.................. 4,671 4,671
Stockholders' equity(3):
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, none outstanding............................. -- --
Common Stock, $.01 par value, 35,000,000 shares authorized,
23,379,829 shares issued and outstanding, 25,129,829
shares issued and outstanding as adjusted................ 234 251
Additional paid-in capital.................................. 245,093 367,151
Retained earnings........................................... 125,031 125,031
Accumulated translation adjustment.......................... 10,575 10,575
--------- --------------
Total stockholders' equity............................... 380,933 503,008
--------- --------------
Total capitalization.................................. $ 397,271 $ 519,346
========= ============
</TABLE>

---------------

(1) Assumes the Underwriters' over-allotment option is not exercised. See
"Underwriting."

(2) For additional information regarding long-term debt, see Note 6 to
Consolidated Financial Statements included in the Company's Annual Report
on Form 10-K for the fiscal year ended January 1, 1995 incorporated herein
by reference. See "Information Incorporated by Reference."

(3) Excludes, as of July 2, 1995, 2,909,035 shares reserved for issuance under
the Company's Stock Option Plans and Employee Stock Purchase Plan. Options
for 2,541,016 shares under the Stock Option Plans were outstanding at July
2, 1995.

12
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The consolidated statement of operations data set forth below for the
fiscal years ended 1992, 1993, and 1994 and the balance sheet data as of fiscal
year end 1993 and 1994 are derived from and qualified by reference to the
Company's audited consolidated financial statements incorporated by reference
herein. The consolidated statement of operations data for the fiscal years 1990
and 1991 and the balance sheet data as of
fiscal year end 1990, 1991 and 1992 are derived from the Company's audited
consolidated financial statements not included or incorporated by reference in
this Prospectus. The selected consolidated statement of operations data for the
six-month periods ended July 3, 1994 and July 2, 1995 and the selected
consolidated balance sheet data as of July 2, 1995, have been derived from
unaudited interim financial statements of the Company contained elsewhere herein
and reflect, in management's opinion, all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the results of
operations for these periods. Results of operations for interim periods are not
necessarily indicative of results of future periods. The information presented
below should be read in conjunction with the Company's consolidated financial
statements, notes thereto and other financial information incorporated by
reference herein. See "Information Incorporated by Reference."

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED ---------------------
--------------------------------------------------------- JULY 3, JULY 2,
1990 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA(1):

Net sales..................................... $ 179,921 $ 279,194 $ 326,801 $ 385,375 $ 392,391 $ 195,475 $ 225,870
Cost of sales................................. 136,996 211,009 259,036 293,936 267,005 132,690 147,083
--------- --------- --------- --------- --------- --------- ---------
Gross profit................................ 40,925 68,185 67,765 91,439 125,386 62,785 78,787
Operating expenses:
Research, development and engineering....... 12,603 18,028 26,366 29,641 21,340 10,813 12,012
Selling, general and administrative......... 14,135 20,571 21,967 28,165 27,101 13,916 18,038
Restructuring charge........................ -- -- -- 38,956 -- -- --
Merger costs................................ -- 2,111 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses.................. 26,738 40,710 48,333 96,762 48,441 24,729 30,050
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)....................... 16,187 27,475 19,432 (5,323) 76,945 38,056 48,737
Other income (expense):
Interest income............................. 4,143 5,680 4,617 2,915 3,306 1,518 2,164
Interest expense............................ (3,917) (5,630) (2,929) (5,510) (2,933) (1,622) (1,198)
Other, net.................................. 1,309 1,082 1,518 605 48 152 444
--------- --------- --------- --------- --------- --------- ---------
Other income (expense).................... 1,535 1,132 3,206 (1,990) 401 48 1,410
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes, minority
interests and equity in joint venture
income.................................... 17,722 28,607 22,638 (7,313) 77,366 38,104 50,147
Provision for income taxes.................... 6,370 14,293 18,375 26,405 23,210 11,050 12,537
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before minority interests and
equity in joint venture income............ 11,352 14,314 4,263 (33,738) 54,156 27,054 37,610
Minority interest in net income (loss) of
consolidated subsidiaries................... (882) 1,025 (9,458) (18,977) 1,091 407 871
Equity in net income of unconsolidated joint
venture..................................... 1,086 2,070 3,172 4,860 5,457 2,751 1,502
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................... $ 13,320 $ 15,359 $ 16,893 $ (9,901) $ 58,522 $ 29,398 $ 38,241
========= ========= ========= ========= ========= ========= =========
Net income (loss) per share(2)................ $ 0.76 $ 0.75 $ 0.79 $ (.46) $ 2.54 $ 1.29 $ 1.59
========= ========= ========= ========= ========= ========= =========
Number of shares used in per share
computation................................. 17,480 20,463 21,412 21,372 22,997 22,758 23,985
========= ========= ========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR END
--------------------------------------------------------- JULY 2,
1990 1991 1992 1993 1994 1995
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA(1):

Working capital.................................... $ 63,150 $ 97,808 $ 97,894 $ 97,265 $ 118,230 $ 121,371
Net property, plant & equipment.................... 90,690 120,904 192,051 187,267 228,883 265,438
Long-term debt & capital lease obligations (less
current portion)................................. 25,057 16,516 27,613 29,482 16,250 11,667
Stockholders' equity............................... 128,747 202,077 248,738 255,331 331,215 380,933
Total assets....................................... $ 191,110 $ 276,979 $ 355,849 $ 382,297 $ 404,095 $ 481,960
</TABLE>

---------------
(1) The Company's fiscal year ends on the Sunday closest to December 31. Fiscal
1992 was a 53-week year, whereas, 1990, 1991, 1993 and 1994 were 52-week
years. The fourth quarter of 1992 was a 14-week quarter, whereas the first,
second and third quarters were 13-week quarters. The additional week in the
fourth quarter of 1992 did not have a material impact on the Company's
results of operations.
(2) Fully diluted amount disclosures are not required because they are
substantially the same as primary amounts disclosed for these periods.

13
<PAGE> 14

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

RESULTS OF MEDIA OPERATIONS

The Company previously supplied thin-film recording heads for hard disk
drives through Dastek, Inc., which ceased operations in mid-1994. Results of
media operations below exclude Dastek, Inc.'s 1992 and 1993 results of
operations and the related restructuring charge in 1993:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED -----------------------
------------------------------------- JULY 3, JULY 2,
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
ANNUAL AND SIX-MONTHS RESULTS OF
OPERATIONS:
Net sales.......................... $ 279,544 $ 334,542 $ 392,391 $ 195,475 $ 225,870
Cost of sales...................... 201,315 225,086 267,005 132,690 147,083
--------- --------- --------- --------- ---------
Gross profit..................... 78,229 109,456 125,386 62,785 78,787
Operating expenses:
Research, development and
engineering................... 13,263 17,867 21,340 10,813 12,012
Selling, general and
administrative................ 17,659 24,488 27,101 13,916 18,038
--------- --------- --------- --------- ---------
Total operating expenses.... 30,922 42,355 48,441 24,729 30,050
--------- --------- --------- --------- ---------
Operating income................... 47,307 67,101 76,945 38,056 48,737
Other income (expense):
Interest income.................. 3,486 2,674 3,306 1,518 2,164
Interest expense................. (1,815) (4,038) (2,933) (1,622) (1,198)
Other, net....................... 1,851 606 48 152 444
--------- --------- --------- --------- ---------
Other income (expense)...... 3,522 (758) 421 48 1,410
--------- --------- --------- --------- ---------
Income before income taxes,
minority interest and equity
in joint venture income....... 50,829 66,343 77,366 38,104 50,147
Provision for income taxes......... 18,375 24,825 23,210 11,050 12,537
--------- --------- --------- --------- ---------
Income before minority interest
and equity in joint venture
income........................ 32,454 41,518 54,156 27,054 37,610
Minority interest in net income of
consolidated subsidiary.......... 712 499 1,091 407 871
Equity in net income of
unconsolidated joint venture..... 3,172 4,860 5,457 2,751 1,502
--------- --------- --------- --------- ---------
Income from media
operations.................. $ 34,914 $ 45,879 $ 58,522 $ 29,398 $ 38,241
========= ========= ========= ========= =========
</TABLE>

The following table sets forth for the period indicated certain financial
data as a percentage of media net sales:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED -----------------------
------------------------------------- JULY 3, JULY 2,
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit........................ 28.0 32.7 32.0 32.1 34.9
Operating income.................... 16.9 20.1 19.6 19.5 21.6
Income from media operations........ 12.5 13.7 14.9 15.0 16.9
</TABLE>

Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form 10-K
incorporated herein by reference for a discussion covering a comparison of the
Company's 1992, 1993 and 1994 results of operations. See "Information
Incorporated by Reference."

14
<PAGE> 15

Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Quarterly Report on Form
10-Q included herein for a discussion covering a comparison of the Company's
results of operations for the six-month periods ended July 3, 1994 and July 2,
1995. See "Quarterly Report on Form 10-Q."

<TABLE>
<CAPTION>
1994 1995
----------------------------------------- ---------------------
FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTERLY RESULTS OF OPERATIONS:
Net sales........................... $ 97,701 $ 97,774 $ 98,172 $ 98,744 $ 105,063 $ 120,807
Cost of sales....................... 64,813 67,877 66,602 67,713 72,296 74,787
-------- -------- -------- -------- --------- ---------
Gross profit...................... 32,888 29,897 31,570 31,031 32,767 46,020
Operating expenses:
Research, development and
engineering.................... 5,325... 5,488 5,324 5,203 6,065 5,947
Selling, general and
administrative................. 7,525 6,391 6,499 6,686 7,542 10,496
-------- -------- -------- -------- --------- ---------
Total operating expenses....... 12,850 11,879 11,823 11,889 13,607 16,443
-------- -------- -------- -------- --------- ---------
Operating income.................... 20,038 18,018 19,747 19,142 19,160 29,577
Other income (expense):
Interest income................... 717 801 902 886 1,034 1,130
Interest expense.................. (852) (770) (679) (632) (614) (584)
Other, net........................ 437 (285) 53 (157) (384) 828
-------- -------- -------- -------- --------- ---------
Other income (expense)......... 302 (254) 276 97 36 1,374
-------- -------- -------- -------- --------- ---------
Income before income taxes,
minority interest and equity in
joint venture income........... 20,340 17,764 20,023 19,239 19,196 30,951
Provision for income taxes.......... 6,015 5,035 6,387 5,773 4,800 7,737
-------- -------- -------- -------- --------- ---------
Income before minority interest
and equity in joint venture
income......................... 14,325 12,729 13,636 13,466 14,396 23,214
Minority interest in net income of
consolidated subsidiary........... 148 259 265 419 415 456
Equity in net income of
unconsolidated joint venture...... 1,267 1,484 1,644 1,062 899 603
-------- -------- -------- -------- --------- ---------
Net income..................... $ 15,444 $ 13,954 $ 15,015 $ 14,109 $ 14,880 $ 23,361
======== ======== ======== ======== ========= =========
Net income per share................ $ 0.68 $ 0.61 $ 0.65 $ 0.60 $ 0.63 $ 0.96
======== ======== ======== ======== ========= =========
</TABLE>

The following table sets forth for the period indicated certain financial
data as a percentage of revenue:

<TABLE>
<CAPTION>
1994 1995
---------------------------------------- ------------------
FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net sales.......................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Gross Profit....................... 33.7 30.6 32.2 31.4 31.2 38.1
Operating Income................... 20.5 18.4 20.1 19.4 18.2 24.5
Net income......................... 15.8 14.3 15.3 14.3 14.2 19.3
</TABLE>

DISCUSSION OF QUARTERLY RESULTS OF OPERATIONS:

The Company's consolidated quarterly net sales remained flat in the $98-$99
million range during 1994 due primarily to the Company's delayed introduction of
next generation, 1800 oersted disk products. In comparison to older generation
1600 oersted disks, the newer 1800 oersted disk permits a doubling of the
storage density on a disk's surfaces. The Company's existing process
technologies used in the production of 1600 oersted disks required substantial
redesign to accommodate the reduced

15
<PAGE> 16

defect levels and enhanced magnetic performance required in 1800 oersted and
above disk products. These substantial changes in the Company's process
technologies required more time to implement than originally expected.

During the first two quarters of 1994, the Company experienced sharper than
normal declines in its overall selling price due in part to the delay in
attaining volume production of higher priced, next generation 1800 oersted
disks. During these quarters, 1600 oersted product prices declined sharply as
the industry supply of these older generation products met or exceeded industry
demand. The declines in average selling prices during the first two quarters
were offset by increased unit sales that arose from the higher unit production
achieved during these periods. In contrast to the first two quarters of the
year, the overall average selling price remained stable during the third and
fourth quarters of 1994 as demand for the Company's products increased. Unit
production output, however, was constrained during these quarters as additional
production capacity at the Company's Malaysian facility was offset by decreased
unit production at the Company's U.S. facilities. As part of the program to
change its process technologies, one U.S. production line was removed from
production early in the fourth quarter for upgrading. On a rotating basis over
the next two years, one U.S. production line will continually be out of
production for upgrading according to the Company's current plans.

The Company's quarterly gross margins and net income for 1994 remained in a
narrow range, consistent with the flat net sales performance. During the fourth
quarter of 1994, the Company began volume production of 1800 oersted products at
its U.S. factories. The average selling price for the fourth quarter increased
slightly on a sequential basis over the third quarter due to the increased mix
of 1800 oersted disks. Start-up costs associated with the volume manufacturing
ramp of 1800 oersted disks at the Company's U.S. facilities, however,
constrained fourth quarter profitability.

During the first quarter of 1995 the Company continued to aggressively
convert production to 1800 oersted products. As these newer, higher priced
products accounted for an increasing proportion of unit sales, the overall
average selling price rose. Overall unit production output expanded modestly
between the fourth quarter of 1994 and the first quarter of 1995 due to improved
manufacturing efficiencies and the addition of a new production line in March at
the Company's Malaysian manufacturing facility. The Company began volume
production of 1800 oersted products at its Malaysian facility during the first
quarter of 1995. As expected, start-up costs associated with this volume
manufacturing ramp limited first quarter profitability in much the same manner
as the U.S. volume manufacturing ramp affected fourth quarter 1994
profitability.

Overall unit production volume between the first and second quarters of
1995 rose strongly due to increased manufacturing yields on 1800 oersted
products, reduced process cycle times, and full utilization of the additional
production line installed in March, 1995. Higher unit sales and a rising average
selling price associated with an increasing mix of 1800 oersted products
produced a strong sequential increase in net sales. Improved manufacturing
efficiencies, combined with the rising average selling price, led to an
expansion in the gross margin percentage and increased overall profitability for
the second quarter.

The Company anticipates that overall unit production volume will continue
to rise during the third and fourth quarters of 1995 but not necessarily at the
same rate as between the first and second quarters of 1995. Assuming market
demand continues to remain strong, the Company will remain production
constrained during this time period.

16
<PAGE> 17

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co., Montgomery Securities and
Hambrecht & Quist LLC are acting as representatives, has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
------------------------------------------------------------------------ ----------------
<S> <C>
Goldman, Sachs & Co..................................................... 468,000
Montgomery Securities................................................... 468,000
Hambrecht & Quist LLC................................................... 468,000
Alex. Brown & Sons Incorporated......................................... 69,200
Needham & Company, Inc. ................................................ 69,200
The Nikko Securities Co. International, Inc. ........................... 69,200
PaineWebber Incorporated................................................ 69,200
Robertson, Stephens & Company, L.P. .................................... 69,200
----------------
Total................................................................. 1,750,000
==============
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price less
a concession of $1.70 per share. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $.10 per share to certain brokers and
dealers. After the shares of Common Stock are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 262,500
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 1,750,000 shares of Common
Stock offered.

The Company has agreed that during the period beginning from the date of
this Prospectus and continuing to and including the date 90 days after the date
of this Prospectus, not to offer, sell, contract to sell or otherwise dispose of
any securities of the Company (other than pursuant to existing employee stock
purchase and option plans) which are similar to the shares of Common Stock or
which are convertible or exchangeable into securities which are substantially
similar to the shares of Common Stock, without the prior written consent of the
representatives of the Underwriters, except for the shares of Common Stock
offered hereby.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.

In connection with this offering, certain Underwriters may engage in
passive market making transactions in the Common Stock on the Nasdaq National
Market immediately prior to the commencement of sales in this offering, in
accordance with Rule 10b-6A under the Exchange Act. Passive market making
consists of displaying bids on the Nasdaq National Market limited by the bid
prices of independent market makers for a security and making purchases of a
security which are limited by such prices and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in the Common Stock during a specified prior period and must be discontinued
when such limit is reached. Passive market making may stabilize the market price
of the Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.

17
<PAGE> 18

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison, Palo Alto, California and for the
Underwriters by Wilson, Sonsini, Goodrich & Rosati, Professional Corporation,
Palo Alto, California.

EXPERTS

The consolidated financial statements of Komag, Incorporated appearing in
Komag, Incorporated's Annual Report (Form 10-K) for the year ended January 1,
1995, as amended by the report on Form 10-K/A, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference which is based in part on the
reports of Chuo Audit Corporation, independent auditors. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.

18
<PAGE> 19

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED JULY 2, 1995
COMMISSION FILE NUMBER 0-16852

KOMAG, INCORPORATED
(REGISTRANT)

INCORPORATED IN THE STATE OF DELAWARE
I.R.S. EMPLOYER IDENTIFICATION NUMBER 94-2914864
275 SOUTH HILLVIEW DRIVE, MILPITAS, CALIFORNIA 95035
TELEPHONE: (408) 946-2300

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.

YES X NO

ON JULY 2, 1995, 23,379,829 SHARES OF THE REGISTRANT'S COMMON STOCK, $0.01
PAR VALUE, WERE ISSUED AND OUTSTANDING.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Q-1
<PAGE> 20

INDEX

KOMAG, INCORPORATED

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated income statements -- Three- and six-months ended July 2,
1995,
and July 3, 1994.......................................................... Q-3
Consolidated balance sheets -- July 2, 1995, and January 1, 1995.......... Q-4
Consolidated statements of cash flows -- Six months ended July 2, 1995,
and July 3, 1994.......................................................... Q-5
Notes to consolidated financial statements -- July 2, 1995................ Q-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ Q-7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................... Q-10
Item 2. Changes in Securities..................................................... Q-10
Item 3. Defaults Upon Senior Securities........................................... Q-10
Item 4. Submission of Matters to a Vote of Security Holders....................... Q-10
Item 5. Other Information......................................................... Q-11
Item 6. Exhibits and Reports on Form 8-K.......................................... Q-11
SIGNATURES........................................................................... Q-12
</TABLE>

Q-2
<PAGE> 21

PART I. FINANCIAL INFORMATION

KOMAG, INCORPORATED

CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ---------------------
JULY 2 JULY 3 JULY 2 JULY 3
1995 1994 1995 1994
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales...................................... $120,807 $97,774 $225,870 $195,475
Cost of sales.................................. 74,787 67,877 147,083 132,690
-------- ------- -------- --------
GROSS PROFIT......................... 46,020 29,897 78,787 62,785
Operating expenses:
Research, development and engineering........ 5,947 5,488 12,012 10,813
Selling, general and administrative.......... 10,496 6,391 18,038 13,916
-------- ------- -------- --------
16,443 11,879 30,050 24,729
-------- ------- -------- --------
OPERATING INCOME..................... 29,577 18,018 48,737 38,056
Other income (expense):
Interest income.............................. 1,130 801 2,164 1,518
Interest expense............................. (584) (770) (1,198) (1,622)
Other, net................................... 828 (285) 444 152
-------- ------- -------- --------
1,374 (254) 1,410 48
Income before income taxes, minority interest,
and equity in joint venture income........... 30,951 17,764 50,147 38,104
Provision for income taxes..................... 7,737 5,035 12,537 11,050
-------- ------- -------- --------
Income before minority interest and equity in
joint venture income......................... 23,214 12,729 37,610 27,054
Minority interest in net income of consolidated
subsidiary................................... 456 259 871 407
Equity in net income of unconsolidated joint
venture...................................... 603 1,484 1,502 2,751
-------- ------- -------- --------
NET INCOME........................... $ 23,361 $13,954 $ 38,241 $ 29,398
======== ======= ======== ========
Net income per share........................... $ 0.96 $ 0.61 $ 1.59 $ 1.29
======== ======= ======== ========
Number of shares used in per share
computation.................................. 24,234 22,822 23,985 22,758
======== ======= ======== ========
</TABLE>

See notes to consolidated financial statements.

Q-3
<PAGE> 22

KOMAG, INCORPORATED

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 1
1995
JULY 2 ---------
1995 (NOTE)
---------
(UNAUDITED)
<S> <C> <C>
ASSETS

Current Assets
Cash and cash equivalents.......................................... $ 79,173 $ 47,329
Short-term investments............................................. 17,000 46,619
Accounts receivable less allowances of $2,380 in 1995 and $2,223 in
1994............................................................ 56,259 44,778
Inventories:
Raw materials................................................... 18,916 15,030
Work-in-process................................................. 4,391 5,652
Finished goods.................................................. 1,958 3,419
--------- ---------
Total inventories.......................................... 25,265 24,101
Prepaid expenses and deposits...................................... 2,058 1,611
Deferred income taxes.............................................. 7,069 7,069
--------- ---------
Total current assets....................................... 186,824 171,507
Investment in Unconsolidated Joint Venture........................... 28,805 22,653
Property, Plant and Equipment
Land............................................................... 4,360 4,360
Building........................................................... 34,484 33,322
Equipment.......................................................... 355,364 294,626
Furniture.......................................................... 5,570 4,711
Leasehold Improvements............................................. 47,388 45,633
--------- ---------
447,166 382,652
Less allowances for depreciation and amortization.................. (181,728) (153,769)
--------- ---------
Net property, plant and equipment.......................... 265,438 228,883
Deposits and Other Assets............................................ 893 1,052
--------- ---------
$ 481,960 $ 424,095
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable............................................. $ 23,160 $ 17,842
Accounts payable to related parties................................ 2,791 2,354
Accrued compensation and benefits.................................. 21,292 17,913
Other liabilities.................................................. 1,451 1,665
Income taxes payable............................................... 5,402 271
Current portion of long-term debt.................................. 11,357 13,232
--------- ---------
Total current liabilities.................................. 65,453 53,277
Long-term Debt, less current portion................................. 11,667 16,250
Deferred Income Taxes................................................ 18,725 18,725
Other Long-term Liabilities.......................................... 511 548
Minority Interest in Consolidated Subsidiary......................... 4,671 4,080
Stockholders' Equity
Preferred stock.................................................... -- --
Common stock....................................................... 234 229
Additional paid-in capital......................................... 245,093 238,262
Retained earnings.................................................. 125,031 86,790
Accumulated foreign currency translation adjustments............... 10,575 5,934
--------- ---------
Total stockholders' equity................................. 380,933 331,215
--------- ---------
$ 481,960 $ 424,095
========== ==========
</TABLE>

---------------
Note: The balance sheet at January 1, 1995 has been derived from the audited
financial statements at that date.

See notes to consolidated financial statements.

Q-4
<PAGE> 23

KOMAG, INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JULY 2 JULY 3
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income......................................................... $ 38,241 $ 29,398
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 28,822 22,633
Provision for losses on accounts receivable..................... (73) 134
Equity in net income of unconsolidated joint venture............ (1,502) (2,751)
Loss on disposal of equipment................................... 480 594
Deferred rent................................................... (37) 25
Minority interest in net income of consolidated subsidiary...... 871 407
Changes in operating assets and liabilities:
Accounts receivable........................................... (11,408) 1,560
Inventories................................................... (1,164) 7,842
Prepaid expenses and deposits................................. (456) 1,384
Trade accounts payable........................................ 5,318 (3,279)
Accounts payable to related parties........................... 437 (379)
Accrued compensation and benefits............................. 3,379 (435)
Other liabilities............................................. (214) (560)
Income taxes payable.......................................... 5,131 3,181
Restructuring liability....................................... -- (14,125)
-------- --------
Net cash provided by operating activities.................. 67,825 45,629
INVESTING ACTIVITIES
Acquisition of property, plant and equipment....................... (65,970) (35,486)
Purchases of short-term investments................................ (6,525) (42,121)
Proceeds from short-term investments at maturity................... 36,144 47,948
Proceeds from disposal of equipment................................ 113 2,470
Deposits and other assets.......................................... 159 285
-------- --------
Net cash used in investing activities...................... (36,079) (26,904)
FINANCING ACTIVITIES
Increase in notes payable.......................................... -- 1,500
Payments of notes payable.......................................... -- (4,500)
Payments of long-term obligations.................................. (6,458) (6,280)
Sale of Common Stock, net of issuance costs........................ 6,836 6,336
Distribution to minority interest holder........................... (280) (280)
-------- --------
Net cash provided by (used in) financing activities........ 98 (3,224)
Increase in cash and cash equivalents......................... 31,844 15,501
Cash and cash equivalents at beginning of year..................... 47,329 27,159
-------- --------
Cash and cash equivalents at end of period......................... $ 79,173 $ 42,660
========= =========
</TABLE>

See notes to consolidated financial statements.

Q-5
<PAGE> 24

KOMAG, INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 2, 1995

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- and six-month periods ended July
2, 1995 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1995.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended January 1, 1995.

The Company uses a 52-53 week fiscal year ending on the Sunday closest to
December 31. The three-month reporting periods for the comparable years included
in this report are each comprised of thirteen weeks.

NOTE 2 -- INVESTMENT IN DEBT SECURITIES

The Company invests its excess cash in high-quality, short-term debt and
equity instruments. Short-term investments consist primarily of AAA-rated,
municipal auction-rate preferred stock with maturities greater than 90 days.
None of the Company's investments have maturities greater than one year.

The following is a summary of the Company's investments by major security
type at amortized cost which approximates its fair value:

<TABLE>
<CAPTION>
JANUARY
JULY 2, 1,
1995 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
State and local government securities................................. $80,009 $70,765
Corporate debt securities............................................. 5,250 2,417
Mortgage-backed securities............................................ 18,133 10,677
-------- -------
$103,392 $83,859
======== =======
Amounts included in cash and cash equivalents......................... $86,392 $37,240
Amounts included in short-term investments............................ 17,000 46,619
-------- -------
$103,392 $83,859
======== =======
</TABLE>

The Company utilizes zero-balance accounts and other cash management tools
to invest all available funds including bank balances in excess of book
balances.

NOTE 3 -- INCOME TAXES

The estimated annual effective income tax rate for 1995 of 25% is lower
than the 1995 combined federal and state statutory rate of 41% and the effective
income tax rate for 1994 of 30%. The Company's wholly-owned thin-film media
operation, Komag USA (Malaysia) Sdn., has been granted a tax holiday for a
period of five years commencing in July 1993. The decrease in the effective
income tax rate for 1995 relative to 1994 is primarily due to anticipated growth
in the percentage of consolidated income to be derived from the Malaysian
operation in 1995.

NOTE 4 -- SUBSEQUENT EVENT

On July 18, 1995, the Board of Directors of the Company authorized the
Company to proceed with filing a Registration Statement with the Securities and
Exchange Commission for the sale of up to 2,012,500 shares of the Company's
Common Stock.

Q-6
<PAGE> 25

KOMAG, INCORPORATED

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

RESULTS OF OPERATIONS:

Revenue

Net sales of thin-film media increased 24% in the second quarter of 1995
relative to the second quarter of 1994. Unit sales volume growth and an increase
in the overall average selling price accounted for approximately two-thirds and
one-third of this substantial net sales increase, respectively. The overall
average selling price typically strengthens only as the result of product mix
shifts to higher-priced, more technologically advanced product offerings. Price
reductions for individual product offerings are characteristic of the thin-film
media industry. The Company began a rapid transition to its current highest-
density product offering (1800 Oe) in the fourth quarter of 1994. Sales of this
product accounted for 61% of unit sales in the second quarter of 1995. The
higher sales mix of 1800 Oe product and a favorable pricing environment arising
from an industry shortage of this product resulted in smaller than normal price
reductions for individual product offerings and strengthened the overall average
selling price in the second quarter of 1995 relative to the second quarter of
1994. Unit sales of the Company's highest density product offering in the second
quarter of 1994 (1600 Oe) accounted for approximately 67% of net sales in the
quarter, but revenues were adversely affected by pricing as industry supply of
this product met or exceeded demand.

In addition to sales of its internally produced disk products, the Company
resells products manufactured by its Japanese joint venture, Asahi Komag Co.,
Ltd. ("AKCL"). Distribution sales of thin-film media manufactured by AKCL were
$0.3 million in the second quarter of 1995 compared to $2.2 million in the
second quarter of 1994. The Company expects that distribution sales of AKCL
product will be minimal throughout 1995 as demand within the Japanese thin-film
media market is expected to continue to absorb most of AKCL's production output.

Net sales increased 16% in the first half of 1995 relative to the first
half of 1994. Over three-quarters of the increase was due to higher unit sales
volume. The overall average selling price increased between the comparable
six-month periods due to the transition to 1800 Oe product and the favorable
pricing environment arising from strong market demand. Distribution sales of
AKCL manufactured thin-film media were $0.4 million in the first half of 1995
compared to $5.5 million in the first half of 1994.

During the second quarter of 1995 three customers individually accounted
for at least ten percent of consolidated net sales: Seagate Technology, Inc.
(42%), Quantum Corporation (24%), and Hewlett-Packard Company (21%). The Company
expects that it will continue to derive a substantial portion of its sales from
a relatively few number of customers. The distribution of sales among customers
may vary from quarter to quarter based on the match of the Company's product
capabilities with specific disk drive programs of the customers.

Increased production volume may occur due to increased effective capacity
(additional production lines and/or reduced process cycle time) and improvements
in manufacturing efficiencies (yields and/or equipment utilization). The
increased unit production volume required to support the growth in unit sales in
the second quarter of 1995 relative to the second quarter of 1994 was almost
entirely achieved through an increase in effective production capacity. The
Company has historically increased effective production capacity through
implementation of process improvement programs designed to improve unit output
and the addition of sputtering lines. Shortened process cycle times resulting
from these process improvement programs accounted for nearly one-half of the
increase in effective capacity in the second quarter of 1995 relative to the
second quarter of 1994. Net physical capacity additions provided the remaining
increase in unit production volume. The Company added its thirteenth, fourteenth
and fifteenth sputtering lines in January 1994, August 1994 and March 1995,
respectively. One of the Company's fifteen sputtering lines is exclusively
devoted to research and development activities. In late 1994,the Company began a

Q-7
<PAGE> 26

program to upgrade its sputtering machines to enhance product capabilities and
shorten process cycle times. The Company expects one machine will be out of
production on a rotating basis for the next two years. Unit production provided
by a slightly improved manufacturing yield mostly offset the unfavorable impact
of lower equipment utilization in the second quarter of 1995 relative to the
second quarter of 1994. An electrical power outage affecting most of the
Malaysian island of Penang halted production at the Company's Penang facility
for several days late in the second quarter of 1995 and contributed to the
decrease in equipment utilization.

Increased unit production volume in the first half of 1995 compared to the
first half of 1994 was primarily achieved through higher effective capacity in
the current year period. Approximately one-half of the effective capacity
increase resulted from process cycle time reductions. Net physical capacity
additions provided the remaining increase in effective capacity. The effects of
slightly lower equipment utilization in the first half of 1995 relative to the
first half of 1994 were partially offset by an improvement in manufacturing
yields.

Gross Margin

The gross margin percentage for the second quarter of 1995 increased
substantially to 38.1% from 30.6% in the second quarter of 1994. The increase
was attributable to the combination of a higher overall average selling price
and a reduction in the overall average unit production cost, resulting primarily
from shortened cycle times. The electrical power disruption in Malaysia
partially offset the effects of these shortened cycle times on the average unit
production cost. The Company believes it is adequately insured for this
manufacturing disruption and has accrued for a settlement in other income.

The gross margin percentage for the first half of 1995 increased to 34.9%
from 32.1% for the first half of 1994. The increase was primarily attributable
to the higher overall average selling price associated with the mix of 1800 Oe
product. The positive effects of manufacturing efficiencies achieved during the
first half of 1995 were offset in part by 1800 Oe production start-up costs
incurred during the first quarter at the Company's Malaysian facility, by
process equipment write-offs recorded for the cessation of the Company's
magneto-optic disk product line, and by the effects of the electrical power
disruption in Malaysia.

The gross margin percentage for the second quarter of 1995 reached an
historical high for the Company and increased markedly from the 31.2% achieved
for the first quarter of 1995. The elimination of start-up costs associated with
the production ramp of 1800 Oe products and the substantial on-going
manufacturing efficiency improvements, combined with a rising overall average
selling price due to strong market demand and an industry shortage of 1800 Oe
disks, resulted in the record gross margin percentage. To the extent these
factors continue, gross margins should continue to exceed the Company's
historical levels. There can be no assurance, however, that industry demand for
high performance 1800 Oe products will continue to outpace supply. In the event
that market supply meets or exceeds demand or the Company is unable to continue
to increase its production mix of 1800 Oe products, the Company's gross margin
percentage would likely decrease. In the longer term the Company believes that
the gross margin percentage may not be sustainable at these record high levels.

Operating Expenses

Research and development ("R&D") expenses increased 8% ($0.5 million) and
11% ($1.2 million) in the three- and six-month periods of 1995, respectively,
compared to the comparable periods of 1994. The increases between these periods
were mainly due to development costs for advanced thin-film media. Selling,
general and administrative ("SG&A") expenses increased $4.1 million in both the
second quarter of 1995 relative to the second quarter of 1994 and in the first
half of 1995 relative to the first half

Q-8
<PAGE> 27

of 1994. The increases were primarily due to higher provisions for the Company's
bonus and profit sharing programs resulting from the substantially higher
operating performance in the 1995 periods. Excluding provisions for bad debts
and the Company's bonus and profit sharing programs, SG&A expenses increased
approximately $0.1 million between the three-month periods and $0.5 million
between the six-month periods. Increases in administrative costs required to
support the growth in the business accounted for the increase.

Interest and Other Income/Expense

Interest income increased $0.3 million (41%) in the second quarter of 1995
relative to the second quarter of 1994 and $0.6 million (43%) in the first half
of 1995 relative to the first half of 1994. The increases were due primarily to
higher interest rates in the current year periods. Average cash and short-term
investment balances were relatively unchanged between the three- and six-month
comparisons. Interest expense decreased $0.2 million (24%) in the second quarter
of 1995 relative to the second quarter of 1994 and $0.4 million (26%) in the
first half of 1995 relative to the comparable period in 1994 due to lower
average outstanding debt balances in the current year periods. Other income
increased $1.1 million in the second quarter of 1995 compared to the second
quarter of 1994 and $0.3 million in the first half of 1995 relative to the first
half of 1994. The increase between the three-month comparisons was primarily due
to the accrual for an insurance recovery related to the electrical power
disruption at the Company's Malaysian manufacturing facility. The increase
between the six-month periods was the net effect of the insurance accrual and
lower foreign currency gains at the Company's Malaysian operations in the first
half of 1995.

Income Taxes

The estimated annual effective income tax rate for 1995 of 25% is lower
than the 1995 combined federal and state statutory rate of 41% and the effective
income tax rate for 1994 of 30%. The Company's wholly-owned thin-film media
operation, Komag USA (Malaysia) Sdn., has been granted a tax holiday for a
period of five years commencing July 1993. The decrease in the effective income
tax rate for 1995 relative to 1994 is primarily due to anticipated growth in the
percentage of consolidated income to be derived from the Malaysian operation in
1995.

Minority Interest in KMT/Equity in Net Income of AKCL

The minority interest in the net income of consolidated subsidiary
represented Kobe Steel USA Holdings Inc's 45% share of Komag Material
Technology, Inc.'s ("KMT's") net income. KMT recorded net income of $1.0 million
and $1.9 million in the second quarter and first half of 1995, respectively,
compared to $0.6 million and $0.9 million in the second quarter and first half
of 1994, respectively.

The Company records 50% of AKCL's net income as equity in net income of
unconsolidated joint venture. AKCL reported net income of $1.2 million in the
second quarter of 1995, down from $3.0 million in the second quarter of 1994.
AKCL reported net income of $3.0 million for the first half of 1995 compared to
$5.5 million for the first half of 1994. AKCL's functional currency is the
Japanese yen and the Company translates AKCL's yen-based income statements to
U.S. dollars at the average exchange rate for the period. The yen strengthened
approximately 18% and 14% between the comparable three-and six-month periods,
respectively. AKCL's net income would have been approximately $0.8 million and
$2.3 million in the second quarter and first half of 1995, respectively, had the
yen-based income statement been translated at the average rates in effect for
the comparable 1994 periods. The differences between the 1994 results and the
yen adjusted 1995 results for both the three- and six-month periods were
attributable to the combination of lower operating performance and the continued
partial writedown of AKCL's investment in Headway Technologies, Inc. AKCL
recorded writedowns of $1.2 million and $2.2 million (net of tax) in the second
quarter of 1995 and first half of 1995, respectively. AKCL will continue such
write downs until Headway emerges from the development stage. These writedowns
are a function of losses incurred at Headway.

Q-9
<PAGE> 28

LIQUIDITY AND CAPITAL RESOURCES:

Cash and short-term investments of $96.2 million at the end of the second
quarter of 1995 increased $2.2 million from the end of the prior fiscal year.
Consolidated operating activities generated $67.8 million in cash during the
first half of 1995 and more than funded the Company's $66.0 million of capital
spending during the six-month period. Sales of Common Stock under the Company's
stock option and stock purchase programs during this period generated $6.8
million, while repayments of long-term obligations used $6.5 million.

Total capital expenditures for 1995 are currently planned at approximately
$150 million. Construction of a 230,000 square-foot manufacturing plant on a
55-acre site in the east Malaysian state of Sarawak, capital expenditures
associated with process improvements in the U.S. and Malaysian facilities,
installation of two additional sputtering lines, and payments on an additional
sputtering line (expected to be installed in Malaysia in 1996) are the major
components of the capital plan. Non-cancellable commitments at July 2, 1995
total approximately $80 million.

The Company believes that, in order to achieve its long-term expansion
objectives and maintain and enhance its competitive position, it will need
significant additional financial resources over the next several years for
capital expenditures, working capital and research and development. The Company
has recently announced its intention to proceed with the registration and public
offering of up to 2,012,500 shares of the Company's Common Stock. During the
two-year period of 1995 and 1996, the Company expects to spend approximately
$400 million to add production capacity at its existing facilities, add a new
U.S. manufacturing facility, and begin construction of a southeast Asian
facility. While the Company has potential cash resources to fund these
expenditures through a combination of the proceeds of the anticipated public
offering, its existing cash balances, cash flow from operations, and funds
available from existing bank lines of credit, new debt or equity financing may
be required to fund this level of capital expenditures. If the Company is unable
to obtain sufficient capital it could be required to reduce its capital
equipment and research and development expenditures which could materially
adversely affect the Company's results of operations.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS -- Not Applicable.

ITEM 2. CHANGES IN SECURITIES -- Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES -- Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --

(a) The Annual Meeting of Stockholders was held on May 24, 1995.

(b) The meeting included the election of the Board of Directors,
submitted as Item No. 1, whose names are as follows:

Tu Chen
Stephen C. Johnson
Craig R. Barrett
Chris A. Eyre
Irwin Federman
George A. Neil
Max Palevsky
Anthony Sun
Masayoshi Takebayashi

Q-10
<PAGE> 29

Item No. 2, Approval of Amendments to Restated 1987 Stock Option
Plan; and Item No. 3, Ratification of the Selection of Ernst & Young
LLP as the Company's Independent Auditors for the year ended December
31, 1995.

Shares of Common Stock voted were as follows:

Item No. 1
(Election of Board of Directors)

<TABLE>
<CAPTION>
TOTAL VOTE FOR TOTAL VOTE WITHHELD
EACH DIRECTOR FROM EACH DIRECTOR
-------------- --------------------
<S> <C> <C>
Tu Chen........................................... 20,076,957 216,301
Stephen C. Johnson................................ 20,077,097 216,161
Craig R. Barrett.................................. 20,134,097 159,161
Chris A. Eyre..................................... 20,133,897 159,361
Irwin Federman.................................... 20,134,047 159,211
George A. Neil.................................... 20,077,097 216,161
Max Palevsky...................................... 20,133,847 159,411
Anthony Sun....................................... 20,133,597 159,661
Masayoshi Takebayashi............................. 20,076,928 216,330
</TABLE>

<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTE
----------- ---------- -------- --------
<S> <C> <C> <C> <C>
Item No. 2
(Amendment to Restated 1987 Stock
Option Plan)...................... 15,772,071 4,207,976 216,226 --
Item No. 3
(Selection of Independent
Auditors)......................... 20,258,964 7,195 27,099 --
</TABLE>

(d) Not Applicable.

ITEM 5. OTHER INFORMATION -- Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits -- Not Applicable.

(b) Form 8-K -- Not Applicable.

Q-11
<PAGE> 30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

KOMAG, INCORPORATED
(Registrant)

By: /s/ WILLIAM L. POTTS, JR.
William L. Potts, Jr.
Vice President and
Chief Financial Officer

By: /s/ STEPHEN C. JOHNSON
Stephen C. Johnson
President and
Chief Executive Officer

July 18, 1995

Q-12
<PAGE> 31

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
Available Information.................. 2
Information Incorporated by
Reference............................ 2
Prospectus Summary..................... 3
Risk Factors........................... 5
The Company............................ 9
Use of Proceeds........................ 11
Dividend Policy........................ 11
Price Range of Common Stock............ 11
Capitalization......................... 12
Selected Consolidated Financial Data... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 14
Underwriting........................... 17
Legal Matters.......................... 18
Experts................................ 18
Quarterly Report on Form 10-Q.......... Q-1
</TABLE>

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1,750,000 SHARES

KOMAG, INCORPORATED

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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LOGO

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GOLDMAN, SACHS & CO.
MONTGOMERY SECURITIES
HAMBRECHT & QUIST
REPRESENTATIVES OF THE UNDERWRITERS

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