
<PAGE>
 
                                 Exhibit 13



Financial Contents



Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Management's Discussion and Analysis
Selected Financial Data
Common Stock Dividends and Price Range
<PAGE>
 
<TABLE>
<CAPTION>
Consolidated Balance Sheets
DECEMBER 31, 1993 AND DECEMBER 25, 1992                1993        1992
(Dollars in thousands)
<S>                                              <C>         <C>
ASSETS
Current assets:
Cash and cash equivalents                        $  149,484  $  173,012
 Short-term investments                             103,585     121,957
 Receivables, net of allowances of $3,266
  in 1993 and $3,227 in 1992                        307,747     575,800
 Inventories                                        510,702     788,085
 Prepaid expenses and deferred tax assets            53,629      94,022
                                                 ----------  ----------
  Total current assets                            1,125,147   1,752,876
                                                 ----------  ----------
Long-term receivables and other assets               45,620      99,409
                                                 ----------  ----------
Property and equipment:
 Leased systems                                      60,229      76,825
 System spares                                      418,057     429,605
 Production and data processing equipment           667,137     860,903
 Office furniture, equipment and improvements       158,062     164,303
 Land and buildings                                 177,791     180,550
                                                 ----------  ----------
                                                  1,481,276   1,712,186
 Less - accumulated depreciation and
  amortization                                      979,856     863,447
                                                 ----------  ----------
 Property and equipment, net                        501,420     848,739
                                                 ----------  ----------
                                                 $1,672,187  $2,701,024
                                                 ==========  ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Notes payable and short-term debt               $  137,056  $  212,621
 Accounts payable                                    54,331      86,020
 Accounts payable - stockholder
  (Fujitsu Limited)                                  18,092     136,737
 Accrued liabilities                                561,281     471,253
</TABLE> 
<PAGE>

<TABLE> 
<S>                                              <C>         <C> 
                                                 ----------  ----------
  Total current liabilities                         770,760     906,631
                                                 ----------  ----------
Long-term debt and liabilities                       52,208     262,243
Deferred income taxes                                59,013     161,034
Stockholders' equity:
 Common stock, $.05 par value
 Authorized - 200,000,000 shares
 Outstanding - 114,578,000 shares at
  December 31, 1993 and 113,139,000
  shares at December 25, 1992                         5,729       5,657
 Additional paid-in capital                         507,895     500,574
 Retained earnings                                  267,664     853,336
 Cumulative translation adjustments                   8,918      11,549
                                                 ----------  ----------
  Total stockholders' equity                        790,206   1,371,116
                                                 ----------  ----------
                                                 $1,672,187  $2,701,024
                                                 ==========  ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
 
<TABLE>
<CAPTION>
Consolidated Statements of Operations
FOR THE THREE YEARS ENDED DECEMBER 31, 1993           1993          1992          1991
<S>                                            <C>           <C>           <C>
(Dollars in thousands,
 except per common share amounts)
 
REVENUES
Equipment sales                               $  1,132,447  $  2,022,110  $  1,234,616
Equipment lease, maintenance and other             548,085       502,624       467,870
                                              ------------  ------------  ------------
                                                 1,680,532     2,524,734     1,702,486
                                              ------------  ------------  ------------
 
COST OF REVENUES
Equipment sales                                    881,528     1,431,338       760,292
Equipment lease, maintenance and other             350,982       335,905       303,133
                                              ------------  ------------  ------------
                                                 1,232,510     1,767,243     1,063,425
                                              ------------  ------------  ------------
  Gross margin                                     448,022       757,491       639,061
                                              ------------  ------------  ------------
 
OPERATING EXPENSES
Engineering and development                        334,514       372,365       312,541
Marketing, general and administrative              354,939       407,030       358,670
Restructuring costs                                478,000           ---           ---
                                              ------------  ------------  ------------
                                                 1,167,453       779,395       671,211
                                              ------------  ------------  ------------
  Loss from operations                            (719,431)      (21,904)      (32,150)
                                              ------------  ------------  ------------
 
INTEREST
Income                                              23,461        28,957        51,551
Expense                                            (17,772)      (21,028)      (12,363)
                                              ------------  ------------  ------------
                                                     5,689         7,929        39,188
 Income (loss) before provision
  for (benefit from) income taxes                 (713,742)      (13,975)        7,038
</TABLE>
<PAGE>
 
<TABLE>
<S>                                                      <C>              <C>              <C>
PROVISION FOR (BENEFIT FROM) INCOME TAXES                   (125,000)          (7,000)           2,600
                                                         -----------      -----------      -----------
 Income (loss) before extraordinary       
 credit and change in accounting principle                  (588,742)          (6,975)           4,438
EXTRAORDINARY CREDIT - Income tax benefit from 
  utilization of net operating loss carryforwards                 --               --            6,190
 
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE            8,746               --               --
                                                         -----------      -----------      -----------
NET INCOME (LOSS)                                        $  (579,996)     $    (6,975)     $    10,628
                                                         ===========      ===========      ===========
EARNINGS (LOSS) PER COMMON SHARE
Income (loss) before extraordinary credit
  and change in accounting principle                     $     (5.17)     $      (.06)     $       .04
                                                         -----------      -----------      -----------
Net income (loss)                                             $(5.09)           $(.06)            $.10
                                                         -----------      -----------      -----------
Average outstanding shares and equivalents               113,933,000      112,203,000      111,677,000
                                                         -----------      -----------      -----------
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

Consolidated Statements of Cash Flows
 
<TABLE>
<CAPTION>
FOR THE THREE YEARS ENDED DECEMBER 31, 1993                     1993             1992             1991
<S>                                                      <C>              <C>              <C>
(Dollars in thousands)
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR           $   173,012      $   245,237      $   239,186
                                                         -----------      -----------      -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                           (579,996)          (6,975)          10,628
Adjustments to reconcile net income (loss) to net 
  cash provided by (used for) operating activities:      
    Depreciation and amortization                            209,612          211,628          151,895
    Restructuring charges                                    478,000               --               --
    Deferred income tax provision                           (102,611)         (27,540)         (14,109)
    Loss (gain) on property and equipment sales                1,208           (5,599)         (12,484)
    (Increase) decrease in receivables                       269,784         (182,322)         108,333
    (Increase) decrease in inventories                       221,454         (103,389)        (252,400)
    (Increase) decrease in prepaid expenses and
      deferred tax assets                                     40,551          (30,534)          19,773
    (Increase) decrease in long-term receivables
      and other assets                                        53,874          (29,831)          41,387
    Decrease in accounts payable                            (150,914)             (33)         (17,890)
    Increase (decrease) in accrued liabilities              (128,722)         148,957          (99,204)
    Increase (decrease) in long-term liabilities             (10,070)           9,012           (6,596)
                                                         -----------      -----------      -----------
Net cash provided by (used for) operating
  activities                                                 302,170          (16,626)         (70,667)
                                                         -----------      -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in short-term investments                            18,372           44,977          186,766
Capital expenditures:
  Leased systems                                             (45,045)         (52,081)         (33,265)
  System spares                                              (50,841)        (105,184)         (74,037)
  Other property and equipment                               (39,033)        (252,397)        (220,572)
Proceeds from property and equipment sales                    68,191           59,565           83,836
                                                         -----------      -----------      -----------
Net cash used for investing activities                       (48,356)        (305,120)         (57,272)
                                                         -----------      -----------      -----------
 
</TABLE>
<PAGE>
 
<TABLE>
<S>                                                      <C>              <C>              <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable and short-term 
  borrowings                                                (106,854)          30,233           52,767
Borrowings under revolving credit agreement                       --          300,000           85,000
Repayments of borrowings under revolving credit 
  agreement                                                 (170,000)         (85,000)              --
Sale of common stock and exercise of options                   7,393           16,854           11,619
Dividends paid                                                (5,676)         (11,214)         (11,068)
                                                         -----------      -----------      -----------
Net cash provided by (used for) financing 
  activities                                                (275,137)         250,873          138,318
                                                         -----------      -----------      -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                       (2,205)          (1,352)          (4,328)
                                                         -----------      -----------      -----------
Net increase (decrease) in cash and cash
  equivalents                                                (23,528)         (72,225)           6,051
                                                         -----------      -----------      -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                 $   149,484      $   173,012      $   245,237
                                                         ===========      ===========      ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
 
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
 
                                                      ADDITIONAL                CUMULATIVE                                          
FOR THE THREE YEARS                           COMMON     PAID-IN    RETAINED   TRANSLATION                                          
ENDED DECEMBER 31, 1993                       STOCK      CAPITAL    EARNINGS   ADJUSTMENTS        TOTAL                             
<S>                                           <C>     <C>           <C>        <C>           <C>                                    
(Dollars in thousands,                                                                                                              
 except per share amounts)                                                                                                          
                                                                                                                                    
BALANCE AT DECEMBER 28, 1990                  $5,509    $472,249   $ 871,965       $20,904   $1,370,627                             
Sale of 1,053,068 shares, net of                                                                                                    
 repurchases, of common stock                                                                                                       
 under employee stock benefit plans               53      11,162         ---           ---       11,215                             
Income tax benefit arising from                                                                                                     
 employee stock option plans                     ---         404         ---           ---          404                             
Cash dividends ($.10 per share)                  ---         ---     (11,068)          ---      (11,068)
Net income                                       ---         ---      10,628           ---       10,628                             
Translation adjustments                          ---         ---         ---        (4,277)      (4,277)
                                              ------    --------   ---------   -----------   ----------                             
BALANCE AT DECEMBER 27, 1991                   5,562     483,815     871,525        16,627    1,377,529                             
Sale of 1,908,024 shares, net of                                                                                                    
 repurchases, of common stock                                                                                                       
 under employee stock benefit plans               95      15,602         ---           ---       15,697                             
Income tax benefit arising from                                                                                                     
 employee stock option plans                     ---       1,157         ---           ---        1,157                             
Cash dividends ($.10 per share)                  ---         ---     (11,214)          ---      (11,214)
Net loss                                         ---         ---      (6,975)          ---       (6,975)
Translation adjustments                          ---         ---         ---        (5,078)      (5,078)
                                              ------    --------   ---------   -----------   ----------                             
BALANCE AT DECEMBER 25, 1992                   5,657     500,574     853,336        11,549    1,371,116                             
Sale of 1,439,269 shares, net of                                                                                                    
 repurchases, of common stock                                                                                                       
 under employee stock benefit plans               72       7,234         ---           ---        7,306                             
Income tax benefit arising from                                                                                                     
 employee stock option plans                     ---          87         ---           ---           87                             
Cash dividends ($.05 per share)                  ---         ---      (5,676)          ---       (5,676)
Net loss                                         ---         ---    (579,996)          ---     (579,996)
Translation adjustments                          ---         ---         ---        (2,631)      (2,631)
                                              ------    --------   ---------   -----------   ----------                             
BALANCE AT DECEMBER 31, 1993                  $5,729    $507,895   $ 267,664       $ 8,918   $  790,206                             
                                              ======    ========   =========   ===========   ========== 
The accompanying notes are an integral part of these financial statements.
 
 
</TABLE>
<PAGE>
 
 NOTE 1
 
SUMMARY OF ACCOUNTING POLICIES

Amdahl Corporation and subsidiaries (the Company or Amdahl) provide large-scale,
high-performance, general-purpose computer systems, software, storage and
communications products.  The Company also provides consulting and professional
services.


PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries.  Intercompany accounts and transactions have been
eliminated.


FISCAL YEAR

The Company's fiscal year ends on the last Friday in December.  As a result,
1993 was a 53-week year, whereas 1992 and 1991 were each 52-week years.


TRANSLATION OF FOREIGN CURRENCIES

The financial position and results of operations of the Company's non-U.S. sales
subsidiaries are measured using local currency as the functional currency.
Accordingly, all assets and liabilities are translated into U.S. dollars at
current exchange rates as of the respective balance sheet date.  Revenue and
expense items are translated at the average exchange rates prevailing during the
period.  Cumulative translation gains and losses are reported as a separate
component of stockholders' equity.

Losses resulting from foreign exchange transactions were $2,948,000, $5,826,000
and $3,340,000 in 1993, 1992 and 1991, respectively, and were included in
marketing, general and administrative expenses.


FOREIGN CURRENCY OPTIONS AND FORWARD CONTRACTS

The Company enters into foreign currency options and forward contracts to
protect against currency exchange risks associated with the settlement of its
non-U.S. intercompany payables and receivables and with inventory purchase
commitments with Fujitsu Limited.  Realized and unrealized gains and losses on
such contracts and the associated cash flows which qualify as hedges are
reported as components of the related transactions.
<PAGE>
 
REVENUES

Revenues from equipment sales and sales-type leases are generally recognized
when the equipment has been shipped, installed and financing arrangements have
been completed.  Revenues from operating leases are recognized over the term of
the respective contracts.

Service for Amdahl products is provided under service and parts warranty or
separate maintenance agreements.  The large-scale computer systems normally
carry a one-year service and parts warranty, and the storage and other products
usually have shorter warranty periods.  Where material, a portion of equipment
sales revenue is deferred and recognized over the warranty period as service is
provided.  Following the warranty period, Amdahl provides maintenance service
under separate contracts which typically can be terminated by the customer on 90
days notice.  Revenues from maintenance contracts are recognized over the term
of the respective contracts as service is provided.


SOFTWARE DEVELOPMENT COSTS

Certain software development costs have been capitalized and amortized over the
life of the product.  At December 31, 1993 and December 25, 1992 software
development costs that had been capitalized were immaterial.


FUTURE ENGINEERING CHANGES

Amdahl's computer systems are architecturally compatible at specific software
and hardware interface levels with the basic functions of competing IBM computer
systems.  The introduction from time to time by IBM of certain product
enhancements requires that Amdahl make product changes to remain fully
compatible.  In addition, the Company makes changes to enhance the functionality
of its products.  The Company provides a reserve for estimated future
engineering changes in connection with each sale.  The reserve is intended to
cover direct material, direct labor and manufacturing overhead associated with
implementation of engineering changes.  Amounts provided and charged to cost of
equipment sales were $16,672,000, $60,278,000 and $1,512,000 in 1993, 1992 and
1991, respectively.


CASH AND CASH EQUIVALENTS

Substantially all cash equivalents consist of investments in major bank time
deposits and certificates of deposit with initial maturities of three months or
less.
<PAGE>
 
SHORT-TERM INVESTMENTS

Substantially all short-term investments consist of major bank time deposits,
certificates of deposit, U.S. Treasury bills and Euro-notes and bonds which the
Company intends to hold between three and twelve months.  Short-term investments
are valued at cost, which approximates market value.

In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Company will adopt this standard in the first
quarter of 1994 and does not believe that adoption of the standard will have a
material impact on its financial statements or results of operations.


INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market.
Systems in process and finished goods include material, labor and manufacturing
overhead.  Year-end inventories consisted of the following:
<TABLE>
<CAPTION>
 
                              1993      1992
<S>                       <C>       <C>
(In thousands)
 
Purchased materials       $134,615  $142,443
Systems in process         233,560   409,879
Finished goods             142,527   235,763
                          --------  --------
                          $510,702  $788,085
                          ========  ========
 
PROPERTY AND EQUIPMENT
</TABLE>

Property and equipment are stated at cost.  Depreciation and amortization are
computed using the straight-line method over estimated useful lives (or, for
leasehold improvements and assets recorded under capital lease obligations, over
the remaining lease terms or estimated useful lives, whichever is shorter) as
follows:
<TABLE>
<CAPTION>
 
                                                YEARS
<S>                                             <C>
 
System spares                                       5
Production and data processing equipment         3-15
Office furniture, equipment and improvements     3-20
Buildings                                       20-40
 
</TABLE>

EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share have been computed based on the weighted
average number of common and common equivalent shares outstanding.  Common
equivalent shares result from the assumed exercise of stock options which would
have a dilutive effect in years where there are earnings.  Primary and fully
diluted earnings per common share amounts are substantially the same.
<PAGE>
 
 NOTE 2

RESTRUCTURING OF OPERATIONS

In 1993 the Company began to restructure its worldwide operations in order to
address the competitive conditions in the markets for large-scale computing
systems, including prices which declined at much greater than normal historical
rates and reduced levels of demand.  The restructuring consists of a series of
planned actions, including a reduction in the number of employees by
approximately one-third, consolidation of offices and facilities and disposition
of assets that are no longer required due to changes in product plans, reduction
in manufacturing capacity by approximately 50%, and elimination of selected
product development programs, as well as other expense reductions.  The majority
of these actions are expected to be initiated by the end of 1994.

In connection with these actions, the Company recorded restructuring charges
totaling $478,000,000 to operating expenses, $243,000,000 of which was recorded
in the first quarter of 1993 and $235,000,000 of which was recorded in the third
quarter of 1993.  The restructuring costs included the following approximate
amounts: $120 million related to reductions in the workforce, $200 million
related to closing excess facilities and write-downs of equipment, $60 million
related to write-downs of excess inventory resulting from reduced manufacturing
capacity and changes in product plans, $10 million related to vendor charges due
to the cancellation of development programs, and other various charges totaling
$88 million.  In total the restructuring charges reflected $298 million of
noncash write-offs of recorded assets and $180 million of projected cash
outflows.  Of the estimated cash outflows, $107 million is expected to occur
beyond 1993.

The Company believes that the restructuring actions which it took in 1993 will
bring its costs in line with anticipated levels of business in 1994 and beyond.
However, levels of business are a function of a number of factors, including
general economic conditions, the availability and cost of components,
competition from smaller, less costly computer systems, and various other
competitive pressures.  Any significant deterioration in anticipated levels of
business would likely require the Company to make additional adjustments to its
expense structure, including additional restructuring charges.


NOTE 3

RELATIONSHIP WITH FUJITSU LIMITED

The Company has entered into agreements with Fujitsu Limited (Fujitsu), a
principal stockholder, which provide for, among other things:

A.  Purchases of computer equipment, subassemblies and spare parts from Fujitsu.
The cost of computer equipment, subassemblies and spare parts purchased from
Fujitsu and the amount included in cost of revenues for equipment sales were as
follows:
<PAGE>
<TABLE> 
<CAPTION>          
                                                         COST OF
                                   PURCHASES             REVENUES
<S>                                <C>                   <C> 
(In thousands)
1993                               $  434,732            $444,595
1992                                1,048,819             775,757
1991                                  855,379             517,680
</TABLE> 

Amdahl was committed to purchase material and other equipment from Fujitsu
totaling approximately $34,000,000 at December 31, 1993. Prices for these
manufacturing materials and other equipment are subject to adjustment if the
U.S. dollar-Japanese yen exchange rate fluctuates outside of specified ranges.
The Company has entered into hedging arrangements designed to protect against
currency exchange risks associated with anticipated product purchases from
Fujitsu in 1994. Also, Amdahl has agreed to purchase from Fujitsu 50% of certain
subsystem components and 100% of certain devices, boards and modules contained
in its current processor products. In addition, the Company has made advance
payments to Fujitsu for future inventory purchases in return for lower prices on
certain components related to these products. Advance payments of $4,886,000 and
$7,339,000 were included in prepaid expenses as of December 31, 1993 and
December 25, 1992, respectively.

B.  Joint development efforts under which Fujitsu supplies Amdahl with services
and material related to the Company's development of current and future
products, resulting in charges to engineering and development expense of
$8,633,000 in 1993, $4,313,000 in 1992 and $11,923,000 in 1991.

In 1991 the Company entered into a cross-license agreement related to certain
technologies in the Company's processor products, in which the Company agreed to
pay Fujitsu up to $15,000,000 in royalties, to be remitted to Fujitsu as
shipments occurred in 1992 and 1993. Amounts charged to cost of revenues related
to this agreement amounted to $3,600,000 in 1993 and $11,400,000 in 1992. In
connection with an agreement for the development and supply by Fujitsu of
certain LSI devices for Amdahl products, the Company paid Fujitsu approximately
$16,000,000 in 1990. This advance payment was expensed in 1990 and 1991 as
materials and services were provided by Fujitsu.

In November 1993 Amdahl and Fujitsu entered into a preliminary agreement
pursuant to which Amdahl and Fujitsu agreed to participate in the joint
development of the Company's next generation of IBM compatible systems. Under
the agreement, Fujitsu will undertake primary responsibility for the design and
manufacture of these systems.

C.  A limitation on Fujitsu's maximum ownership interest in Amdahl, such that
until April 19, 1994 Fujitsu will not purchase additional shares of Amdahl
common stock if such purchases would cause its beneficial ownership of
outstanding Amdahl common stock, computed on a fully-diluted basis, to exceed
49.5%.

D. Distributorship arrangements whereby Fujitsu markets Amdahl's computer
equipment in Brazil, Japan, Malaysia, South Korea and Spain. Sales in 1993, 1992
and 1991 by the Company of computer

<PAGE>
 
systems and complementary storage products to Fujitsu contributed $28,162,000,
$60,268,000 and $29,211,000 to equipment sales and $11,687,000, $24,733,000 and
$12,163,000 to gross margin, respectively. At December 31, 1993 and December 25,
1992 receivables included $35,931,000 and $42,153,000, respectively, from
Fujitsu.

E.  A commitment by Fujitsu, pursuant to a loan agreement entered into in
January 1994, under which Fujitsu would provide loans to the Company in an
aggregate amount not to exceed $100,000,000 (see Note 7).


NOTE 4

EQUIPMENT LEASING AND THIRD PARTY TRANSACTIONS

The Company is the lessor of equipment under operating leases for periods
generally less than three years. Certain operating leases contain provisions for
early termination with a penalty or with conversion to another system. The cost
of leased systems is depreciated to a zero value on a straight-line basis over
two to four years. Accumulated depreciation on leased systems was $13,320,000 at
December 31, 1993 and $32,530,000 at December 25, 1992. The Company also leases
equipment to customers under sales-type leases as defined in Statement of
Financial Accounting Standards No. 13. The components of the net investment in
sales-type leases were as follows:

<TABLE>
<CAPTION>
                                                     1993                1992
<S>                                            <C>                  <C>
(In thousands)                                                    
Minimum rentals receivable                        $63,221            $142,738
Estimated residual values of                                      
 leased equipment (unguaranteed)                    3,182               6,988
Less unearned interest income                      (7,557)            (18,458)
                                                  -------            --------
Net investment in sales-type leases               $58,846            $131,268
                                                  =======            ========
</TABLE> 
 
Minimum rentals receivable under existing leases as of December 31, 1993 were as
follows:
 
<TABLE> 
<CAPTION> 
                                               SALES-TYPE           OPERATING
<S>                                            <C>                  <C> 
(In thousands)                                              
1994                                              $29,382             $21,739
1995                                               21,067              10,312
1996                                                9,611               4,329
1997                                                1,786                 957
1998                                                1,179                 411
Thereafter                                            196                 200
                                                  -------             -------
                                                  $63,221             $37,948
                                                  =======             =======
</TABLE>

In addition, during the periods presented, the Company sold certain equipment
subject to operating leases and financed certain sales-type equipment leases and
installment contracts with financing institutions ("third parties"). The Company
sometimes agrees to perform certain services and obligations with respect to

<PAGE>
 
the equipment and related leases, such as general lease administration,
invoicing and collection of rentals, payment of insurance and personal property
taxes, maintenance services and non-priority remarketing of equipment that comes
off lease.  For these services and obligations, the Company generally receives
its normal maintenance charges and a remarketing and administration fee.  Many
of the agreements with third parties provide the Company with residual rights in
revenues, if any, derived from the equipment after the third parties have
received a designated return.  Equipment sales revenues arising from these
transactions with third parties were approximately $91,000,000, $157,000,000 and
$94,000,000 in 1993, 1992 and 1991, respectively.


NOTE 5

FINANCIAL INSTRUMENTS

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: RISK AND FAIR VALUE

The Company hedges certain portions of its exposure to foreign currency
fluctuations through a variety of strategies and financial instruments,
including the use of forward foreign exchange contracts.  These contracts
generally have maturities that do not exceed three months.  At December 31, 1993
the Company had approximately $132,000,000 of forward foreign exchange contracts
outstanding.  The gains and losses associated with currency rate changes on
forward foreign exchange contracts are recorded currently in income as they
offset corresponding gains and losses on the foreign currency-denominated assets
and liabilities being hedged.  Therefore, the carrying value of forward foreign
exchange contracts approximates their fair value, which was immaterial at
December 31, 1993 and December 25, 1992.

The Company enters into foreign currency options to protect against currency
exchange risks associated with its probable anticipated, but not firmly
committed, non-U.S. intercompany sales and with both inventory purchase
commitments and probable anticipated inventory purchases from Fujitsu.  Realized
and unrealized gains and losses on such contracts and the associated cash flows
that qualify as hedges are reported as components of the related transactions.
These option contracts generally have maturities that do not exceed one year.
The net income effect deferred on foreign currency option contracts represents
the amount by which the carrying value of the option contracts exceeded their
fair value and was immaterial as of December 31, 1993 and December 25, 1992.

The Company enters into interest rate swap agreements as hedges of investments
and accrues the differential to be paid or received under the agreements as
interest rates change over the life of the contracts.  At December 31, 1993 the
Company had approximately $50,000,000 notional principal outstanding under these
agreements.  The fair value of interest rate swaps is the estimated amount that
the Company would receive or pay to terminate the swap agreements at the
reporting date, taking into account current interest rates.  The fair value of
interest rate swaps at December 31, 1993 and December 25, 1992 was immaterial.
<PAGE>
 
BALANCE SHEET FINANCIAL INSTRUMENTS: FAIR VALUE

At December 31, 1993 and December 25, 1992 the carrying value of cash, cash
equivalents and short-term investments approximated fair value, primarily
because of the immediate or short-term maturity of these instruments.  At
December 31, 1993 and December 25, 1992 the carrying value of notes payable,
short-term debt and long-term debt approximated fair value because of the
variable interest rate nature of these instruments.


CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of temporary cash investments and trade
receivables.  The Company has cash investment policies that limit the amount of
credit exposure to any one financial institution and restrict placement of these
investments to financial institutions evaluated as highly creditworthy.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base, and
their dispersion across many different industries and geographies.


NOTE 6

ACCRUED LIABILITIES

Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
                                      1993               1992
(In thousands)                                 
<S>                               <C>                  <C>
Payroll and vacation              $102,363           $ 95,328
Restructuring costs                145,601                ---
Income taxes                        48,707             53,332
Deferred income                    108,365            133,944
Future engineering changes          57,133             86,004
Other                               99,112            102,645
                                  --------           --------
                                  $561,281           $471,253
                                  ========           ========
</TABLE> 
 
NOTE 7

LONG-TERM DEBT AND LIABILITIES AND BANK CREDIT AGREEMENTS
 
Long-term debt and liabilities consisted of the following:

<TABLE> 
<CAPTION>  
                                      1993               1992
(In thousands)
<S>                               <C>                  <C>
Bank credit agreement             $130,000           $300,000
Capitalized lease obligations
  (Note 12)                         21,654             23,243
Long-term liabilities               31,804             40,468
                                  --------           --------
                                   183,458            363,711
 
</TABLE>
<PAGE>

<TABLE>
<S>                               <C>                <C>
Less current maturities            131,250            101,468
                                  --------           --------
Long-term debt and liabilities    $ 52,208           $262,243
                                  ========           ========
</TABLE>

The Company's credit agreement with a group of banks providing for an unsecured
multi-year revolving credit facility was amended effective September 24, 1993.
As a result, the Company's borrowing capacity under the agreement was reduced
from $450,000,000 to $300,000,000, its tangible net worth maintenance
requirement was reduced, and the Company was required to repay all outstanding
borrowings upon expiration of the facility on January 31, 1994.  The interest
rate applicable to borrowings under the revolving credit agreement was, at the
Company's option, based upon the U.S. reference rate, Interbank Offered Rate or
Certificate of Deposit rate.  At December 31, 1993, and December 25, 1992,
$130,000,000 and $300,000,000, respectively, was outstanding under the revolving
credit agreement.  The amount outstanding at December 31, 1993 was classified as
short-term debt and was repaid by the Company on January 31, 1994.

The amended revolving credit agreement contained certain financial restrictions
and covenants.  The Company was in compliance with all financial ratio
requirements and covenants at December 31, 1993.

In January 1994 the Company and Fujitsu entered into an agreement under which
Fujitsu would provide loans to the Company in an aggregate amount not to exceed
$100,000,000.  Such loans bear interest at a rate based upon the London
Interbank Offered Rate.  Any outstanding loan balance is payable to Fujitsu on
January 28, 1997.  As of January 28, 1994, $80,000,000 was outstanding under
this agreement.

In addition, the Company has credit agreements with a number of banks providing
for short-term borrowings in U.S. dollars and various foreign currencies at
varying interest rates.  At December 31, 1993 and December 25, 1992, $5,806,000
and $111,153,000, respectively, was outstanding under these agreements.

Interest paid on all borrowings was $19,821,000, $19,366,000 and $12,015,000 in
1993, 1992 and 1991, respectively.

Long-term liabilities of $31,804,000 include deferred equipment maintenance
revenues and long-term amounts accrued under the Executive Incentive Performance
Plan.
<PAGE>
 
NOTE 8

MAJOR CUSTOMER, GEOGRAPHIC AREA AND PRODUCT LINE DATA

No single customer accounted for 10% or more of total revenues in 1993, 1992 or
1991.

The Company's operations by geographical area for the three years ended 
December 31, 1993 were as follows:

<TABLE>
<CAPTION>
                                                                                              ASIA
                                                          UNITED                           PACIFIC      ADJUSTMENTS
1993                                                      STATES     CANADA      EUROPE    & OTHER   & ELIMINATIONS   CONSOLIDATED
(in thousands)
<S>                                                   <C>          <C>        <C>         <C>        <C>              <C>
Revenues:
 Customers                                            $1,042,490   $ 50,540   $ 488,259   $ 99,243        $     ---     $1,680,532
 Intercompany                                            186,400      4,412      27,774        ---         (218,586)           ---
                                                      ----------   --------   ---------   --------        ---------     ----------
Total revenues                                        $1,228,890   $ 54,952   $ 516,033   $ 99,243        $(218,586)    $1,680,532
                                                      ==========   ========   =========   ========        =========     ==========
 
Income (loss) from operations                         $ (502,594)  $ (5,949)  $(190,410)  $  3,275        $ (23,753)    $ (719,431)
Interest income, net                                                                                                         5,689
                                                                                                                        ----------
Loss before income taxes                                                                                                $ (713,742)
                                                                                                                        ==========
 
Identifiable assets                                   $  983,405   $ 33,259   $ 763,273   $ 59,057        $(393,128)    $1,445,866
Corporate assets                                                                                                           226,321
                                                                                                                        ----------
Total assets                                                                                                            $1,672,187
                                                                                                                        ==========
</TABLE> 
<TABLE> 
<CAPTION> 
                                                                                              ASIA
                                                          UNITED                           PACIFIC      ADJUSTMENTS
1992                                                      STATES     CANADA      EUROPE    & OTHER   & ELIMINATIONS   CONSOLIDATED
(in thousands)
<S>                                                   <C>          <C>        <C>         <C>        <C>              <C>
Revenues:
  Customers                                           $1,568,390   $115,151   $ 698,655   $142,538        $     ---     $2,524,734
  Intercompany                                           383,566      1,267     101,377        ---         (486,210)           ---
                                                      ----------   --------   ---------   --------        ---------     ----------
Total revenues                                        $1,951,956   $116,418   $ 800,032   $142,538        $(486,210)    $2,524,734
                                                      ==========   ========   =========   ========        =========     ==========
</TABLE>
<PAGE>
 
<TABLE>
<S>                                                   <C>          <C>        <C>         <C>        <C>              <C>
 Income (loss) from operations                        $   21,494   $ (6,510)  $ (35,980)  $ (8,164)       $   7,256     $  (21,904)
Interest income, net                                                                                                         7,929
                                                                                                                        ----------
Loss before income taxes                                                                                                $  (13,975)
                                                                                                                        ==========
Identifiable assets                                   $1,800,511   $ 43,505   $ 913,376   $ 99,713        $(420,431)    $2,436,674
Corporate assets                                                                                                           264,350
                                                                                                                        ----------
Total assets                                                                                                            $2,701,024
                                                                                                                        ==========
</TABLE> 
<TABLE> 
<CAPTION>  
                                                                                              ASIA
                                                          UNITED                           PACIFIC      ADJUSTMENTS
1991                                                      STATES     CANADA      EUROPE    & OTHER   & ELIMINATIONS   CONSOLIDATED
(in thousands)
<S>                                                   <C>          <C>        <C>         <C>        <C>              <C>
Revenues:
 Customers                                            $1,006,495   $133,992   $ 447,730   $114,269        $     ---     $1,702,486
 Intercompany                                            270,076      2,839      87,679        ---         (360,594)           ---
                                                      ----------   --------   ---------   --------        ---------     ----------
Total revenues                                        $1,276,571   $136,831   $ 535,409   $114,269        $(360,594)    $1,702,486
                                                      ==========   ========   =========   ========        =========     ==========
Income (loss) from operations                         $  (46,906)  $  7,354   $  15,094   $    695        $  (8,387)    $  (32,150)
Interest income, net                                                                                                        39,188
                                                                                                                        ----------
Income before income taxes                                                                                              $    7,038
                                                                                                                        ==========
Identifiable assets                                   $1,384,115   $ 72,826   $ 671,390   $ 45,734        $(231,195)    $1,942,870
Corporate assets                                                                                                           392,694
                                                                                                                        ----------
Total assets                                                                                                            $2,335,564
                                                                                                                        ==========
</TABLE>
<PAGE>
 
The Company's operations are structured to achieve consolidated objectives.  As
a result, significant interdependencies and overlaps exist among the Company's
operating units.  Accordingly, the revenue, operating income (loss) and
identifiable assets shown for each geographic area may not be indicative of the
amounts that would have been reported if the operating units were independent of
one another.

Intercompany sales and transfers of manufacturing materials between areas are at
prices which, in general, provide a profit after coverage of all manufacturing
costs.  Intercompany sales of finished systems are at prices intended to provide
a profit for purchasing entities after coverage of marketing, support and
general and administrative costs.

Operating income (loss) is revenue less related costs and direct and allocated
operating expenses, excluding interest and, for all areas except the United
States, the unallocated portion of corporate expenses.  United States operating
income (loss) is net of corporate research and development and administrative
expenses.

Corporate assets are those assets maintained for general purposes, principally
cash and short-term investments.

The Company operates in the large-scale computer system and related storage and
communications products segment of the data processing industry.  Revenues for
similar classes of products or services within this one business segment for the
most recent three years are presented below:
<TABLE>
<CAPTION>
 
                                     1993    1992    1991
<S>                                <C>     <C>     <C>
(In millions)
Processors                         $  857  $1,696  $  980
Storage products                      277     316     221
Communications products                26      35      65
Maintenance services                  474     431     397
Software and education services        47      47      39
                                   ------  ------  ------
 Total                             $1,681  $2,525  $1,702
                                   ======  ======  ======
</TABLE>
 
NOTE 9
 
CAPITAL STOCK

There are 200,000,000 authorized shares of common stock, par value of $.05 per
share, of which 114,578,000 shares were issued and outstanding as of December
31, 1993.

As of December 31, 1993 the Company had reserved shares of its common stock for
the following purposes:
<PAGE>
 
<TABLE>
<CAPTION>
DESCRIPTION                     SHARES RESERVED
<S>                             <C>
Stock options-
 Outstanding                         10,736,213
 Available for grant                  1,931,946
Employee Stock Purchase Plan          3,475,959
Restricted Stock Plan                   361,782
                                     ----------
                                     16,505,900
                                     ==========
</TABLE>

In January 1994, the Board of Directors adopted the 1994 Stock Incentive Plan
(the 1994 Plan), subject to stockholder approval at the 1994 Annual Meeting of
Stockholders.  Upon the 1994 Plan becoming effective, the Company's 1971 and
1974 Stock Option Plans, the 1982 Non-Qualified Stock Option Plan and the
Restricted Stock Plan would be cancelled and all outstanding options and rights
under these plans would be incorporated into the 1994 Plan.  Up to 14,300,000
shares would be initially reserved for issuance under the 1994 Plan.

There are 5,000,000 authorized shares of Preferred Stock, par value of $1 per
share.  This stock, if issued, will carry liquidation preferences and other
rights, as determined by the Board of Directors.  As of December 31, 1993, no
Preferred Stock had been issued.


NOTE 10

EMPLOYEE STOCK OPTION AND BENEFIT PLANS

Under the Company's stock option plans, options generally become exercisable in
cumulative annual installments beginning one year after the date of grant, are
fully exercisable after four or five years and expire after five or ten years.
Options are granted to non-employee directors, under the Automatic Option Grant
Program.  On December 31, 1993, options for 1,278,577 shares were exercisable at
prices ranging from $4.88 to $18.88.

Activity in the Company's option plans is summarized as follows:

<TABLE>
<CAPTION>
                             SHARES     OPTION PRICES
<S>                       <C>         <C>
Options outstanding at
December 28, 1990         5,396,139   $ 0.07 - $20.75
  Granted                 1,070,965   $14.06 - $15.00
  Exercised                (192,894)  $ 0.07 - $14.59
  Expired or cancelled     (119,725)  $ 0.38 - $15.50
                          ---------   ---------------
Options outstanding at
December 27, 1991         6,154,485   $ 0.38 - $20.75
  Granted                 5,636,840   $ 7.00 - $17.50
  Exercised                (511,393)  $ 0.38 - $15.50
 
</TABLE>
<PAGE>
 
<TABLE>
<S>                      <C>          <C>
  Expired or cancelled   (4,705,662)  $ 0.38 - $20.75
                         ----------   ---------------
Options outstanding at
December 25, 1992         6,574,270   $ 0.38 - $20.75
  Granted                 9,681,672   $  4.72 - $8.19
  Exercised                 (39,231)  $  0.38 - $7.03
  Expired or cancelled   (5,480,498)  $ 0.38 - $20.75
                         ----------   ---------------
Options outstanding at
December 31, 1993        10,736,213   $ 4.72 - $18.88
                         ==========   ===============
</TABLE>

Under the Employee Stock Purchase Plan, the Company's employees, subject to
certain restrictions, may purchase shares of common stock at a price per share
that is the lesser of 85% of the fair market value as of the first day or the
last day of each three month purchase period.

As of December 31, 1993, the Company had 387,270 shares of common stock
outstanding with certain officers and key employees under the Restricted Stock
Plan.  These shares carry certain restrictions on transferability, which will
lapse over periods as determined by the Board of Directors at the time of grant.
The difference between the fair market value at the date of grant and the
purchase price of the shares (generally, $.05 per share) is recorded as
compensation expense ratably over the period from the date of grant to the date
the restrictions lapse.

The Company has a Capital Accumulation Plan available to all its domestic and
Canadian employees to which it contributes based on its profits.  The Company
also has a Savings Plan for domestic employees whereby it matches 25% of
employee contributions up to specified limits.  In addition, under the Executive
Incentive Performance Plan, amounts up to 2% of income before taxes are accrued
for selected key employees instead of their participation in the Capital
Accumulation Plan.  Approximately half of the award vests over the following
four years and the remainder vests over a service period of up to twenty years.
The total cost of these plans charged to income was $3,705,000 in 1993 and
$5,234,000 in 1991.  In 1992 the cost of these plans was immaterial.


NOTE 11

INCOME TAXES

In the first quarter of 1993 the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes."  The
adoption of this standard changed the Company's method of accounting for income
taxes from the deferred method to an asset and liability method.  FAS 109 was
adopted on a prospective basis and amounts presented for prior years have not
been restated.  The cumulative effect of this change in accounting increased
earnings in 1993 by $8,746,000, or $0.08 per share.
<PAGE>
 
Income (loss) before taxes and the provision for (benefit from) income taxes
were comprised of the following:
<TABLE>
<CAPTION>
 
                                          1993       1992       1991
<S>                                  <C>         <C>        <C>
(In thousands)
Income (loss) before taxes:
 Domestic                            $(488,628)  $ 27,476   $(35,539)
 Foreign                              (225,114)   (41,451)    42,577
                                     ---------   --------   --------
                                     $(713,742)  $(13,975)  $  7,038
                                     =========   ========   ========
 
Provision for (benefit from)
income taxes:
 Federal-
  Current                            $ (47,378)  $ 40,650   $  5,012
  Deferred, net                          6,578    (20,529)    (1,970)
                                     ---------   --------   --------
                                       (40,800)    20,121      3,042
                                     ---------   --------   --------
 State-
  Current                               (4,253)     1,524        680
  Deferred, net                          5,466      2,839       (608)
                                     ---------   --------   --------
                                         1,213      4,363         72
                                     ---------   --------   --------
 
 Foreign-
  Current                               (5,090)    (3,571)    15,001
  Deferred, net                        (80,323)   (27,913)   (15,515)
                                     ---------   --------    -------
                                       (85,413)   (31,484)      (514)
                                     ---------   --------   --------
  Net tax provision
   (benefit)                         $(125,000)  $ (7,000)  $  2,600
                                     =========   ========   ========
</TABLE>

The effective income tax provision (benefit) differed from the statutory Federal
provision due to the following:
<TABLE>
<CAPTION>
                                          1993       1992      1991
<S>                                  <C>         <C>       <C>
(In thousands)
Statutory Federal tax
 provision (benefit)                 $(249,810)  $ (4,752)  $ 2,393
State tax provisions,
 net of Federal tax
 benefit                                   780      2,880        47
Research and development
 credits                                   ---     (1,221)   (2,396)
Net operating losses in
 excess of available
 benefits                              120,558      7,081     1,000
Foreign subsidiaries'
</TABLE>
<PAGE>
 
<TABLE>
<S>                                  <C>         <C>        <C>
 earnings taxed at
 rates in excess of
 (less than) the
 statutory Federal
 rate                                       94   (11,531)     1,174
Other                                    3,378       543        382
                                     ---------   --------   -------
Net tax provision
 (benefit)                           $(125,000)  $ (7,000)  $ 2,600
                                     =========   ========   =======
Net effective tax rate                     18%        50%       37%
                                     ---------   --------   -------
</TABLE>

Net income tax refunds of $16,000,000 were received by the Company in 1993, and
net income taxes of $12,077,000 and $57,340,000 were paid by the Company in 1992
and 1991, respectively.

The components of the net deferred tax liability under FAS 109 as of December
31, 1993 were as follows:
<TABLE>
<CAPTION>
 
<S>                                            <C>
(In thousands)                           
Deferred tax liabilities:                
Tax on foreign income                         $ (46,094)
Depreciation                                    (42,273)
Other                                           (16,861)
                                              ---------
Total deferred tax liabilities                 (105,228)
                                              ---------
Deferred tax assets:                     
Reserves                                        165,578
Revenue timing                                   18,656
Net operating loss carryforwards                 50,672
                                              ---------
                                                234,906
Valuation allowance                            (152,337)
                                              ---------
Total deferred tax assets                        82,569
                                              ---------
Net deferred tax liability                    $ (22,659)
                                              =========
</TABLE>
No tax benefit was recorded for losses other than recoverable taxes or future
taxable income from the reversal of deferred items.

The valuation allowance of $152,337,000 at December 31, 1993 consisted of
worldwide operating losses, deferred tax assets, and tax credit carryforwards
which may expire before the Company can utilize them.  The Company believes
sufficient uncertainty exists regarding the realizability of these items, and
accordingly, a valuation allowance has been established.

For years prior to 1993, deferred taxes as accounted for under Accounting
Principles Bulletin No. 11 resulted from differences in
<PAGE>
 
the timing of revenue and expense recognition for tax return and financial
statement purposes. The tax effects of these timing differences for the years
indicated were as follows:
<TABLE>
<CAPTION>
 
                                    1992       1991
<S>                             <C>        <C>
(In thousands)
Taxes on foreign income
 currently payable              $(24,452)  $(15,771)
Accelerated depreciation           8,882     14,324
Reserves currently
 deductible (not currently
 deductible) for tax purpose     (49,663)    37,678
Revenue timing                    16,800    (49,362)
Other items                        2,830     (4,962)
                                --------   --------
Net amount                      $(45,603)  $(18,093)
                                ========   ========
</TABLE>

The Company provides in full for United States income taxes on the earnings of
foreign subsidiaries not considered indefinitely invested outside the United
States.  Cumulative earnings of foreign subsidiaries considered indefinitely
invested outside of the United States amounted to $130 million at December 31,
1993.  If these earnings were distributed, deferred tax assets would become
available to substantially reduce or eliminate any resulting United States
income tax liability.

The Company had operating loss carryforwards remaining at December 31, 1993 for
certain foreign subsidiaries of approximately $59 million, approximately $27
million of which expire at various dates from 1997 through 2003 and
approximately $32 million of which can be carried forward indefinitely.

During the fourth quarter of 1993 the Internal Revenue Service (IRS) completed
its field audit of the Company's 1985 and 1986 tax years.  Results of the audit
were similar to the IRS' proposed adjustments to the 1983 and 1984 tax years,
the most significant of which related to the treatment of system spares.  The
Company expects to file a protest with the Appeals Division of the IRS
contesting the proposed adjustments to tax years 1985 and 1986 and combine this
action with the protest already underway regarding tax years 1983 and 1984.  In
the opinion of management, the final resolution of the protest will not have an
adverse impact on the Company's operating results or financial position.


NOTE 12

LEASE COMMITMENTS

The Company leases a substantial portion of its principal facilities under
capital lease agreements extending through the year 2008.  Capitalized
facilities leases totaling $25,652,000 and $31,366,000 with accumulated
amortization of $15,487,000 and
<PAGE>
 
$18,285,000 were included in the land and buildings classification on the
balance sheets at December 31, 1993 and December 25, 1992, respectively.  The
lease agreements provide for renewal options extending the lease terms beyond
the initial terms in five-year increments.  The Company also leases certain
equipment and sales and service facilities under operating leases.  The minimum
lease commitments as of December 31, 1993 were as follows:
<TABLE>
<CAPTION>
 
                                   CAPITAL   OPERATING
                                    LEASES      LEASES
<S>                                <C>       <C>
(In thousands)
1994                              $  3,662    $ 33,231
1995                                 3,318      25,922
1996                                 3,318      21,543
1997                                 3,318      17,742
1998                                 3,273      14,686
After 1998                          23,598      46,934
                                  --------    --------
Total minimum lease commitments   $ 40,487    $160,058
                                              ========
 
Less imputed interest
 (9.25% to 13.76%)                 (18,833)
                                  --------
Present value of minimum lease
  commitments (Note 7)            $ 21,654
                                  ========
</TABLE>

Rental expense charged to income was $44,953,000 in 1993, $48,130,000 in 1992
and $43,623,000 in 1991.


NOTE 13

LITIGATION

     Multiple securities class action lawsuits were filed against the Company
and certain of its directors, officers and other employees in September and
October of 1992 in the United States District Court for the Northern District of
California.  These cases were subsequently consolidated into a single action.
On September 10, 1993 the Court gave final approval to a settlement of this
litigation under which all claims in the litigation were dismissed and finally
settled, and plaintiffs and their attorneys received a cash payment from the
Company and its insurer.  The settlement payment did not have a material impact
on the Company's financial position or results of operations.
<PAGE>

NOTE 14

SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                       FIRST     SECOND       THIRD     FOURTH         YEAR
(In thousands, except per common share amounts)
<S>                                                <C>         <C>        <C>         <C>        <C>
FISCAL QUARTER 1993
Revenues                                           $ 380,713   $463,206   $ 393,673   $442,940   $1,680,532
                                                   =========   ========   =========   ========   ==========
Gross margin                                       $  82,709   $139,402   $ 105,264   $120,647   $  448,022
                                                   =========   ========   =========   ========   ==========
Loss before taxes                                  $(340,353)  $(29,599)  $(296,930)  $(46,860)  $ (713,742)
                                                   =========   ========   =========   ========   ==========
Loss before accounting change                      $(248,453)  $(23,699)  $(275,730)  $(40,860)  $ (588,742)
                                                   =========   ========   =========   ========   ==========
Net loss                                           $(239,707)  $(23,699)  $(275,730)  $(40,860)  $ (579,996)
                                                   =========   ========   =========   ========   ==========
 
Loss per common share:
  Loss before accounting change                    $   (2.19)  $   (.21)  $   (2.41)  $   (.36)  $    (5.17)
                                                   =========   ========   =========   ========   ==========
 Net loss                                          $   (2.12)  $   (.21)  $   (2.41)  $   (.36)  $    (5.09)
                                                   =========   ========   =========   ========   ==========
 
 
FISCAL QUARTER 1992
Revenues                                           $ 497,916   $692,983   $ 588,840   $744,995   $2,524,734
                                                   =========   ========   =========   ========   ==========
Gross margin                                       $ 174,744   $219,943   $ 146,594   $216,210   $  757,491
                                                   =========   ========   =========   ========   ==========
Income (loss) before taxes                         $   7,394   $ 28,948   $ (55,567)  $  5,250   $  (13,975)
                                                   =========   ========   =========   ========   ==========
Net income (loss)                                  $   4,394   $ 16,948   $ (30,767)  $  2,450   $   (6,975)
                                                   =========   ========   =========   ========   ==========
Net income (loss) per common share                 $     .04   $    .15   $    (.27)  $    .02   $     (.06)
                                                   =========   ========   =========   ========   ==========
</TABLE>
<PAGE>
 
Report of Independent Public Accountants

TO AMDAHL CORPORATION:

We have audited the accompanying consolidated balance sheets of Amdahl
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1993
and December 25, 1992, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amdahl Corporation and
subsidiaries as of December 31, 1993 and December 25, 1992, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.

As discussed in Note 11 to the Consolidated Financial Statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, in 1993.

                                                            ARTHUR ANDERSEN & CO

SAN JOSE, CALIFORNIA
JANUARY 31, 1994

MANAGEMENT'S DISCUSSION AND ANALYSIS

1993 COMPARED TO 1992
RESULTS OF OPERATIONS

In 1993 the Company began to restructure its worldwide operations in order to
address the competitive conditions in the markets for large-scale computing
systems, including prices which declined at much greater than normal historical
rates and reduced levels of demand.  The restructuring consists of a series of
planned actions, including a reduction in the number of employees by
approximately one-third, consolidation of offices and facilities and disposition
of assets that are no longer required due to changes in product
<PAGE>
 
plans, reduction in manufacturing capacity by approximately 50%, and elimination
of selected product development programs, as well as other expense reductions.
The majority of these actions are expected to be initiated by the end of 1994.

In connection with these actions, the Company recorded restructuring charges
totaling $478,000,000 to operating expenses, $243,000,000 of which was recorded
in the first quarter of 1993 and $235,000,000 of which was recorded in the third
quarter of 1993.  The restructuring costs included the following approximate
amounts: $120 million related to reductions in the workforce, $200 million
related to closing excess facilities and write-downs of equipment, $60 million
related to write-downs of excess inventory resulting from reduced manufacturing
capacity and changes in product plans, $10 million related to vendor charges due
to the cancellation of development programs, and other various charges totaling
$88 million.  In total the restructuring charges reflected $298 million of
noncash write-offs of recorded assets and $180 million of projected cash
outflows.  Of the estimated cash outflows, $107 million is expected to occur
beyond 1993.


REVENUES

Total revenues decreased 33% from 1992 to 1993, and equipment sales decreased
44%.  Prices for the Company's 5995M mainframe computers, as well as the
Company's other products, declined at greater than normal historical rates
because of significant competitive pressures.  In 1993 prices for the 5995M and
5995A processors declined approximately 34% and 38%, respectively, compared to
systems of like configuration and model sold in 1992.  The Company also
experienced reduced levels of demand during 1993 for certain of its products,
particularly the 5995M mainframe systems.  Processor shipment volumes of the
5995M and the older 5995A series decreased approximately 23% and 32%,
respectively.  As a result, processor equipment sales decreased 50%.  The
reduced volume of business reflected ongoing economic weakness in the Company's
principal markets, particularly its international markets.  Demand for large-
scale mainframe processors also continued to be negatively impacted by a shift
by some customers from centralized mainframe computing to smaller systems and by
an excess supply of computing capacity in the marketplace.  Also, as previously
reported, a limited number of customers affected by component failure associated
with deliveries of the 5995M mainframe system deferred additional purchases of
those systems.  A decrease of 13% in storage equipment sales also contributed to
the Company's revenue decrease in 1993.

Maintenance, lease and other revenues increased 9% from the prior year,
reflecting increased maintenance revenues from a larger customer installed base
and increased consulting and services revenues.
<PAGE>
 
Revenues were also adversely impacted by approximately $58 million by a
strengthened U.S. dollar, as international revenues denominated in foreign
currencies translated to fewer dollars in 1993, when compared to 1992.


GROSS MARGINS

Gross margin as a percentage of revenues declined from 30% in 1992 to 27% in
1993.  The decreases in processor pricing discussed above more than offset
improved gross margins on storage equipment sales and maintenance services
revenues, lower production costs resulting from manufacturing efficiencies from
maturing product lines, and a decrease in cost of equipment sales of
approximately $44 million related to the provision for implementation of
engineering changes to support IBM features on certain 5995M processors shipped
during 1993, when compared to 1992.


OPERATING EXPENSES

Engineering and development expenses amounted to $334,514,000 in 1993, a
decrease of 10% from 1992.  Marketing, general and administrative expenses
decreased 13% to $354,939,000 in 1993.  These decreases reflect the benefits
from the Company's reduction in force in November 1992 and the restructuring
actions taken in 1993, as well as other cost control programs.  Operating
expenses also included a separate category for the 1993 restructuring charges
discussed previously.

In the first quarter of 1993 the Company implemented Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." This statement requires that the cost of these benefits be accrued in
the financial statements.  The effect of this implementation did not have a
material impact on the Company's financial position or results of operations.

Statement of Financial Accounting Standards No. 106, which established
accounting standards for employers' accounting for postretirement benefits other
than pensions, was required to be adopted in 1993.  The Company does not offer
post-retirement benefits and therefore this statement did not have a material
impact on the Company's financial position or results of operations.


INTEREST INCOME/EXPENSE AND INCOME TAXES

Net interest income decreased 28% in 1993 from the prior year due to lower
average investment levels and decreased yields.

The effective annual income tax rate decreased from 50% in 1992 to 18% in 1993.
No tax benefit was recorded for losses other than recoverable taxes or future
taxable income from the reversal of
<PAGE>
 
deferred items.  The Company believes uncertainty exists as to the realizability
of certain tax assets.  Therefore, a valuation reserve was recorded in 1993,
resulting in the decreased tax benefit.

In the first quarter of 1993 the Company implemented Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative
effect of this accounting change increased earnings in 1993 by $8,746,000, or
$0.08 per share.  Income taxes for the prior period were not restated for this
change.


1992 COMPARED TO 1991

REVENUES

Revenues increased 48% from 1991 to 1992.  Equipment sales increased 64% and
accounted for 96% of the year over year revenue increase.  Processor equipment
sales increased 75%, primarily as a result of volume shipments of the Company's
new 5995M processor.  Combined processor shipment volumes of the 5995M and
5990/5995A series increased approximately 47%.  However, because of intense
competition, especially during the later half of the year, prices for the 5995M
decreased approximately 26% during 1992.  This rate of decline in pricing was
more acute when compared to pricing patterns for previous processors during
their first year of shipments.  In addition, prices for the older 5990/5995A
series processors decreased approximately 57% in 1992 compared to systems of
like configuration and model sold in 1991.  An increase of 45% in storage
equipment sales revenues also contributed to the Company's revenue increase in
1992 as shipments of the Company's new storage products reached volume levels.

Maintenance, lease and other revenues increased 7% from the prior year primarily
due to maintenance revenue from a larger installed base of the Company's
processor products.


GROSS MARGINS AND OPERATING EXPENSES

The gross margin percentage decreased from 38% in 1991 to 30% in 1992,
reflecting the significant decreases in processor pricing.  In addition, cost of
equipment sales included the provision of approximately $60 million in 1992
(compared to approximately $2 million in 1991) for implementation of
engineering changes to support IBM features on certain 5995M processors shipped
during 1992.

Gross margins and operating expenses were also unfavorably impacted by a charge
of $25 million in the third and fourth quarters of 1992, of which approximately
$13 million was charged to cost of sales and approximately $12 million was
charged to operating expenses, in connection with a nine percent reduction in
the employee workforce in November 1992.
<PAGE>
 
Operating expenses increased approximately 16% from 1991 to 1992 and were 31%
of revenues in 1992 compared to 39% of revenues in 1991.  The 19% increase in
1992 in engineering and development expenses was due primarily to the increased
average number of employees in 1992, compared to 1991, and depreciation expense
associated with additional capital equipment used for product design and
development.  The 13% increase in marketing, general and administrative expenses
reflected expenses associated with a larger salesforce.


INTEREST INCOME/EXPENSE AND INCOME TAXES

Net interest income decreased 80% in 1992 from the prior year due to lower
average investment levels, decreased yields and increased average debt levels.

The effective annual income tax rate increased from 37% in 1991 to 50% in 1992.
The higher rate actually reflected an increased tax benefit given the year's
loss before taxes.  The higher rate was primarily due to additional tax benefits
from foreign subsidiaries' earnings taxed at rates lower than the statutory
Federal rate.  Included in this tax benefit was the permanent reinvestment of
approximately $30 million of the Company's Irish subsidiary's prior years'
earnings.


FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

Operating results are a function of a number of factors, including general
economic conditions, the availability and cost of components, the uncertainties
inherent in the development, engineering and manufacturing of technically
complex products, the performance and reliability of these products, the
requirement to maintain compatibility with competing IBM systems, and various
other competitive pressures.

The Company expects the competitive pricing pressures and the shift in the mix
of units shipped to equipment with smaller configurations (which are less
profitable) will continue to adversely affect revenues and gross margins in
1994.  A persistence of the economic weakness in the Company's international
markets experienced in prior years would also have a material adverse impact on
earnings.  Also, the Company believes that the growth of the market for
mainframe systems generally is being impacted by the competition from smaller,
less costly computer systems.

The Company believes that the restructuring actions which it took in 1993 will
bring its costs in line with anticipated levels of business in 1994 and beyond.
However, any significant deterioration in these levels of business would likely
require the Company to make additional adjustments to its expense structure,
including additional restructuring charges.  Because of these
<PAGE>
 
uncertainties the Company is unable to predict when it will be able to achieve
or sustain profitability.

In the latter part of 1993 the Company reorganized along lines of business
consisting of its compatible processors, storage products, maintenance and
consulting services, open systems and Huron software businesses, in order to
enable the Company to more effectively enhance and expand its product offerings.
Because of the factors noted above affecting its traditional mainframe business,
the Company intends to rely increasingly on its ability to utilize lower cost
technologies in future compatible processor products and on the ability of its
newer lines of business to contribute a higher percentage of revenues and
profits to overall operations.  Successful implementation of this strategy is,
however, subject to the inherent risks associated with the introduction of new
technologies and the Company's lack of extensive experience in developing
product offerings not related to its traditional compatible processor business.

In May 1993 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." The Company will adopt this standard in the first
quarter of 1994 and does not believe that adoption of the standard will have a
material impact on its financial statements or results of operations.

 
FINANCIAL CONDITION

DECEMBER 31, 1993 COMPARED TO DECEMBER 25, 1992

The Company's net cash position (cash and short-term investments net of short-
term and long-term bank debt) improved by $233 million, from a net borrowing
position of $116 million at December 25, 1992 to a net cash and investment
position of $117 million at December 31, 1993.

Cash, cash equivalents and short-term investments decreased $42 million,
reflecting cash provided by operating activities which was offset by cash used
for repayments of bank borrowings and capital expenditures (net of proceeds from
property and equipment sales).  Receivables decreased $268 million due to
decreased revenues and improved collections.  Inventories decreased $277 million
primarily due to the Company's efforts to reduce inventory levels and as a
result of additional inventory reserves taken in 1993, including $60 million
related to the restructuring actions taken in the first and third quarters of
1993 (discussed under "Results of Operations").  Long-term receivables and other
assets decreased $54 million primarily due to decreased sales-type lease
receivables.  Net property and equipment decreased by $347 million primarily due
to write-downs of approximately $200 million related to the restructuring
actions taken in 1993, as well as ongoing depreciation charges.
 
<PAGE>
 
The cash, cash equivalents and short-term investment balances as of December 31,
1993 included approximately $175 million currently invested outside the United
States.  Repatriation of these investments and cash would give rise to Federal
taxable income for the year of transfer, taxes for which have been provided.
(See Note 11 to the Consolidated Financial Statements regarding foreign
subsidiaries' earnings on which taxes have not been provided.)

Accounts payable and accounts payable to Fujitsu decreased $150 million due
primarily to significantly reduced purchases of manufacturing materials.  Notes
payable and short-term debt decreased $76 million because the Company paid down
borrowings under a number of its credit agreements.  The increase in accrued
liabilities of $90 million was primarily due to accruals of costs associated
with restructuring the Company's operations.

At December 31, 1993 and December 25, 1992, $130,000,000 and $300,000,000,
respectively, was outstanding under the Company's revolving credit agreement
with a group of banks.  The amount outstanding at December 31, 1993 was
classified as short-term debt and was repaid by the Company upon expiration of
the facility on January 31, 1994.  (See Note 7 to the Consolidated Financial
Statements.)
 
In January 1994 the Company and Fujitsu entered into an agreement under which
Fujitsu would provide loans to the Company in an aggregate amount not to exceed
$100,000,000.  Such loans bear interest at a rate based upon the London
Interbank Offered Rate.  Any outstanding loan balance is payable to Fujitsu on
January 28, 1997.  As of January 28, 1994, $80,000,000 was outstanding under
this agreement.


LIQUIDITY

The nature of the computer industry, combined with the current economic
environment, make it very difficult for the Company to predict future liquidity
requirements with certainty.  However, the Company believes that internally
generated cash and borrowings under its loan agreement with Fujitsu will be
adequate to finance continuing operations, investments in plant and equipment,
inventories and spare parts, and expenditures for the development of new
products at least through the next twelve months, providing that financial
results are not significantly less favorable than planned, and objectives for a
further reduction in inventories are achieved.  Capital spending for items other
than leased systems in 1994 is expected to be less than the $90 million spent in
1993.  While customer demands for lease financing constitute a potential use of
cash, the Company feels that, as in the past, adequate sources exist to provide
such funding on a non-recourse basis.  The Company also expects that other
sources of capital will be available to meet any additional financing
requirements during and beyond 1994.
 
<PAGE>
 
The Company has no significant commitments with vendors other than Fujitsu (see
Note 3 to the Consolidated Financial Statements).
<PAGE>
 
Selected Financial Data

<TABLE>
<CAPTION>
FOR THE FIVE YEARS ENDED DECEMBER 31, 1993               1993         1992         1991        1990        1989
(In thousands, except per common share amounts)
<S>                                                <C>          <C>          <C>         <C>         <C>
Revenues                                           $1,680,532   $2,524,734   $1,702,486  $2,158,755  $2,101,121
Income (loss) before extraordinary
 credit and accounting change                        (588,742)      (6,975)       4,438     183,954     152,972
Net income (loss)                                    (579,996)      (6,975)      10,628     183,954     152,972
Earnings (loss) per common share:
 Income (loss) before extraordinary
  credit and accounting change                          (5.17)        (.06)         .04        1.66        1.39
 Net income (loss)                                      (5.09)        (.06)         .10        1.66        1.39
Dividends per common share                                .05          .10          .10         .10         .10
Long-term debt and liabilities                         52,208      262,243      138,347      59,893      87,085
Total assets                                        1,672,187    2,701,024    2,335,564   2,326,767   2,233,666
</TABLE>
<PAGE>
 
Common Stock Dividends and Price Range

DIVIDENDS

In the third quarter of 1993 the Company suspended the quarterly cash dividend
on its common stock which the Company had paid since April 1977.  Dividends
declared per share for the most recent five years are shown under "Selected
Financial Data." Payment of future dividends will be dependent upon the
Company's earnings, capital requirements, financial condition and other factors.


MARKET PRICE

The common stock is listed on both the American and London Stock Exchanges.  The
following table sets forth, for the periods indicated, the range of high and low
sale prices on the American Stock Exchange-Composite Transactions, as reported
by The Wall Street Journal.

<TABLE>
<CAPTION>
 
 
1993                 HIGH      LOW
<S>               <C>      <C>
 
First Quarter     $ 8 1/2  $ 6 5/8
Second Quarter      6 1/2    4 5/8
Third Quarter       6 3/8    4 1/2
Fourth Quarter      7 1/8    4 3/8
 
 
1992                 HIGH      LOW
 
First Quarter     $20 5/8  $15 1/4
Second Quarter     18 1/4   14 1/2
Third Quarter      18 3/8    8 7/8
Fourth Quarter      9 3/8    6 5/8
</TABLE>

On December 31, 1993 there were approximately 22,500 holders of record of Amdahl
common stock.
