Mike Cordano Executive Vice President, Sales and Marketing The Gray Market Mike Cordano Executive Vice President, Sales and Marketing July 25, 2019 Maxtor Confidential

Agenda Gray Market Defined Examples Reasons for Existence Impact Solutions July 25, 2019 Maxtor Confidential

What is the Gray Market? Unauthorized sale of new, authentic, branded products diverted from authorized distribution channels or imported into a country for sale without the consent or knowledge of the manufacturer. Not unique to the IT industry Luxury goods Pharmaceuticals Recording and Film industry Source: AGMA July 25, 2019 Maxtor Confidential

Examples of Gray Market OEM system manufacturers Selling excess inventory out the back door July 25, 2019 Maxtor Confidential

Examples of Gray Market Selling outside designated territory VAT Carousel Fraud (European Union) Smuggling / Illegal Importing July 25, 2019 Maxtor Confidential

Examples of Gray Market Abuse of discount programs Providing fraudulent contract or end user information Providing forged documentation Asserting false claims of competitive situation Price protection abuse and price forwarding July 25, 2019 Maxtor Confidential

Example – Price Protection Abuse Distributor POS Reporting Week 1 Reported POS: 0 Actual POS: 1,000 BOH Inventory: 4,000 Week 2 Week 3 Week 4 Reported POS: 4,000 EOH Inventory: 0 List Price $50 List Price $45 Distributor claims Price Protection for 4,000 units sold after list price decrease. 4,000 x $5 = $20,000 Actual PP claim should be = 1,000 x $5 = $5,000 July 25, 2019 Maxtor Confidential

Why does the Gray Market exist? Profit opportunity and price advantage High import duties China Brazil High brand preference Prevalent amongst high volume, low margin, commodity products 17% 47% July 25, 2019 Maxtor Confidential

Range of price advantage obtained on Gray Market-sourced product Percentage of respondents Range of price advantage July 25, 2019 Maxtor Confidential Source: KPMG and AGMA study February 2003

What is the Impact of Gray Market? Loss of profit margin Pricing instability Erosion of brand equity Decreased customer satisfaction Creates false demand Increase in warranty returns Source: KPMG and AGMA study February 2003 July 25, 2019 Maxtor Confidential

Initiatives to Mitigate Gray Market Monolithic pricing Consistent contractual agreements Distribution compliance audits Integrate sales and incentive data to better control incentive claims Dedicated resources to manage gray market issues and monitor partner compliance Time for a change? Consignment Inventory July 25, 2019 Maxtor Confidential