[2][3] The Maxtor founders, James McCoy, Jack Swartz, and Raymond Niedzwiecki—graduates of the San Jose State University School of Engineering and former employees of IBM—began the search for funding in 1981.

Cassin and Chuck Hazel (Bay Partners) provided the initial $3 million funding and the company officially began operations on July 1, 1982.

The company received an additional round of financing of approximately $37 million in 1984 before going public in 1986,[4] with Goldman Sachs as the prime underwriter.

In December 1986, Maxtor acquired U.S. Design Corporation, a loss-making manufacturer of data storage subsystems for microcomputers, for $16.1 million in a stock swap.

[8] The transition was a tough one as the early products of this union (notably the 7120AT 3.5-inch 120 MB drive) had many quality and design problems.

In 1996, the company completely redesigned its hard drive product line by introducing its DiamondMax series with a Texas Instruments digital signal processor.

Maxtor sold the rights to the series to Sequel of Santa Clara, California in the mid-1990s, and the company exited the server drive market.

Teetering on the brink of bankruptcy in 1992, Maxtor's exit from the high-capacity 5.25-inch SCSI market temporarily left a product void in the industry.

Its Maxtor One-Touch II external hard drive was marketed as convenient storage for the home user.

This was considered by many industry watchers to be a particularly peculiar move, since the market for such hard drives (mainly notebook computers and MP3 players) was already experiencing rapid growth, with no signs of slowing down in the foreseeable future.