MILPITAS, CA -- January 20, 1999 -- Read-Rite Corporation (NASDAQ: RDRT) today announced sales of $230.2 million and net income and diluted net income per share of $1.1 million and $.02, respectively, for the first quarter ended December 31, 1998. This compares with sales of $175.9 million and a net loss and net loss per share of $29.5 million and $.61 per share for the fourth quarter ended September 30, 1998; and sales of $261.4 million and a net loss and net loss per share, which included an after-tax charge of $91.8 million, of $90.9 million and $1.88 for the first quarter ended December 31, 1997.

Read-Rite experienced very strong sequential growth during the quarter, with sales increasing 31 percent and HGA unit shipments 46 percent higher than the previous quarter ended September 30, 1998. Read-Rite continued to broaden its customer mix, and shipped in volume on a significant number of customer programs for the 3.2 - 3.4 GB and 4.3 GB per platter hard disk drive programs. Read-Rite achieved significant gross margin improvement, despite very competitive pricing pressures, as a result of the company's continued emphasis on productivity. Gross margin for the first quarter was $34.9 million or 15.1 percent of sales compared to negative gross margins throughout fiscal year 1998. The improved financial results during the quarter demonstrate the effectiveness of the company's focus on its core objectives: technology leadership, customer satisfaction and productivity improvement through its operational excellence program.