FREMONT, CA - July 25, 2001 - Read-Rite Corporation (Nasdaq: RDRT) today reported a pro formanet income and earnings per diluted share of $4.8 million and $0.04 respectively, on revenues of $175.2 million in the third fiscal quarter ending July 1, 2001. This represents Read-Rite's third consecutive quarter of profitability and eighth consecutive quarter of GMR market share growth. The company reported net income and diluted earnings per share of $9.7 million and $0.08, respectively, including a $4.9 million one-time gain on the sale of its property and building in Malaysia.

For the nine months ending July 1, 2001, the company reported pro forma net income and earnings per diluted share of $31.2 million and $0.27, respectively, on revenues of $558.4 million. Year-to-date revenue is 36% higher than the corresponding period last year. Including one-time charges and gains, and the impact of the company's portion of the Scion Photonics results, the company reported net income and diluted earnings per share of $28.4 million and $0.24, respectively.

Read-Rite continued to improve its financial position and ended the quarter with $135.9 million in cash, up $21.7 million from the second quarter. Inventory was down $6.9 million from the second quarter as the company maintained a conservative approach towards its build schedule and inventory position. This reduction resulted in an improvement in annualized inventory turns to 16.6 from 14.8 for the previous quarter. The company invested $28.8 million in capital
equipment of which $25.2 million was for the recording head business and $3.6 million was for Scion, with depreciation for the quarter of $26.2 million. The company is on track to spend the budgeted $105 to $110 million on capital for both the head and optical businesses in FY 2001.The company shipped 22.5 million heads and 2.6 million HSA's during the quarter, compared to 22.9 million heads and 3.2 million HSA's in the previous quarter. The reduced head stack shipments were the result of a shift in customer mix and the utilization of more outside headstacking partners. These factors, along with a reduction in the average selling price, resulted in revenues of $175.2 million compared to $193.3 million in the previous quarter. Nevertheless, the company's significant progress during the quarter in improving yields and controlling manufacturing costs on both the 20 GB & 30 GB per platter heads enabled it to grow market share and maintain profitability despite the drop in revenue.

"Maintaining profitability in this difficult and volatile economic climate is a significant accomplishment," stated Alan S. Lowe, president and chief executive officer. He added, "I have no doubt that the reason for this achievement is our restructuring efforts over the past few years, which have transformed us into what I believe is the most cost competitive supplier in the industry. However, sustaining this success will require that we continue providing our customers with high quality time-to-market technology, that we redouble our vigilance and focus on controlling costs, and that we continue growing our market share on both existing and new customer programs."

FIBER OPTICS BUSINESS

Scion Photonics reported revenues of $1.7 million and a loss of $6.4 million in its third fiscal quarter. Scion's current order backlog is $2.5 million, of which $1.6 million is for process automation equipment and $0.9 million for application specific photonic components and development contracts. Venkatesan Murali, Scion's chief operating officer, in noting that Scion has achieved a number of important milestones this past quarter, stated, "we completed construction of a best-in-class 8 inch planar lightwave circuit (PLC) fab, began manufacturing a 40-channel, 100 GHz array waveguide gratings (AWG's), introduced prototype variable output attenuators (VOA's), and our equipment division introduced four new tools for optical process automation." He added, "these are all great achievements for the team, especially given that the company is less than one-year old."

BUSINESS OUTLOOK

Taking into account industry analysts' forecasts of a decline in
the PC and HDD industry, the company's current projection is that
revenues in the fourth fiscal quarter will be lower by 5-10% from the
third fiscal quarter, but that the company still expects a breakeven to
slightly positive diluted earnings per share for its recording head business. The company continues to believe that the long-term demand for data storage will be strong given the growth of non-PC applications, network attached storage and storage area networks this year and into the year 2002. We therefore remain confident in the company's long-term revenue and earnings potential.

Read-Rite Corporation is one of the world's leading independent manufacturers of magnetic recording heads, head gimbal assemblies (HGAs), and head stack assemblies (HSAs) for disk drives and tape drives. The company is headquartered in Fremont, California, and has operations in California, Thailand, the Philippines, Japan, Singapore and South Korea. The company's website is located at <http://www.readrite.com>. Read-Rite is also the majority shareholder of Scion Photonics, Inc., an integrated solution provider to the fiber optics industry whose offerings include advanced DWDM products, fiber optic assembly equipment and application specific photonic components. Scion's website is located at <http://www.scionphotonics.com>.

This release contains forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This news release and the company's statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results for the company and its subsidiaries may vary materially from the expectations contained in such forward-looking statements. The forward-looking statements in this release include statements addressing the following subjects: future financial and operating results, future demand and future market share. There can be no assurance that demand for the company's products will continue at current or greater levels, or that the company will continue to grow or maintain revenues, operating profit, market share or earnings. Factors that could cause actual results to differ include, but are not limited to: demand for the company's products could weaken and lead to order cancellations or rescheduling; the company may be unable achieve and maintain satisfactory yields on its products; the company's design-ins and qualifications for additional products may not occur or could take place at a slower rate than anticipated; the company may be unsuccessful in ramping volume production for its products; industry conditions could worsen; the industry trend toward fewer heads per hard disk drive and competitive pricing pressures could accelerate; competitor's introduction of GMR and other products earlier and/or more cost effectively than the company; and the other factors described in the company's reports filed with the SEC, including, but not limited to, its Annual Report on Form 10-K for fiscal 2000, its Quarterly Reports on Form 10-Q for the first quarter of fiscal 2001 ended December 31, 2000 and second quarter of fiscal 2001 ended April 1, 2001. Read-Rite undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.

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