UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

SECURITIES EXCHANGE ACT OF 1934

XYRATEX LTD

(Translation of registrant’s name into English)

Langstone Road,

Havant
PO9 1SA
United Kingdom

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:   
x Form 20-F     o Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

Xyratex Ltd is incorporating by reference the information set forth in this Form 6-K into its registration statements on Form S-8 (File No. 333-169612), Form S-8 (File No. 333-138570), Form S-8 (File No. 333-125244), Form S-8 (File No. 333-125238), Form S-8 (File No. 333-116811), Form S-8 (File No. 333-116810), Form S-8 (File No. 333-116809)  and Form S-8 (File No. 333-116808).

NEWS RELEASE

Havant, UK — July 16, 2012 - Xyratex Ltd (Nasdaq: XRTX) today released the following financial information for the second quarter of its 2012 fiscal year, ended May 31, 2012:

·                                          Management’s Discussion and Analysis of Financial Condition and Results of Operations

·                                          Unaudited condensed consolidated financial statements

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in our Annual Report on Form 20-F as filed with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Overview

We are a leading provider of data storage technology including modular solutions for the enterprise data storage industry and hard disk drive capital equipment. We report our operations in two product segments: Enterprise Data Storage Solutions (previously Networked Storage Solutions or NSS) and Hard Disk Drive (HDD) Capital Equipment (previously Storage Infrastructure or SI). During 2012 we changed the title of our operating segments to reflect the markets in which we operate, but have not made any other changes to our segmental reporting.

Our Enterprise Data Storage Solutions products are primarily HDD based storage subsystems and solutions, which we provide to Original Equipment Manufacturers, or OEMs, and our HDD Capital Equipment products consist of HDD manufacturing process equipment, which we sell directly to manufacturers of HDDs and their component suppliers. We form long-term strategic relationships with our customers and we support them through our operations in the United States, Asia and Europe. In our 2011 fiscal year, sales to our top six customers, NetApp Inc. (“NetApp”), Dell Inc. (“Dell”), IBM Corp. (“IBM”), EMC, Hewlett-Packard Company (“HP”) and Seagate Technology PLC, accounted for 93% of our revenues with sales to NetApp, Dell and IBM accounting for 42%, 22% and 13% of our revenues respectively. Our top six customers in the six months ended May 31, 2012 were NetApp, Dell, IBM, Western Digital Corporation (“Western Digital”), EMC and HGST, a subsidiary of Western Digital, and accounted for 89% of our revenues with sales to NetApp, Dell and IBM accounting for 42%, 21% and 14% of our revenues, respectively. We had 29 customers that individually contributed more than $0.5 million to revenues in our 2011 fiscal year.

As well as our manufacturing and operational capability, our revenues are highly dependent on our research and development efforts. We enter into joint development projects with our key customers and suppliers in order to research and introduce new technologies and products.

Revenues

Revenues from sales of products in both of our segments are impacted by underlying increases in the amount of digitally stored information. Our enterprise data storage solutions revenues are primarily dependent on the worldwide enterprise data storage market, the market share of our OEM customer base, particularly that of key customers, and changes in that customer base. Our HDD capital equipment revenues are specifically affected by changes in shipped volume and increases in the individual storage capacity of disk drives. Revenues from these products are subject to significant fluctuations, particularly from quarter to quarter, as they are dependent on the capital investment decisions and installation schedules of our customers.

Demand for our HDD capital equipment products in 2011 was at an historically low level. We believe this reflected changes in the underlying market for disk drives, such as a reduction in demand for laptop drives, as well as customer specific factors including the proposed acquisitions by Seagate and Western Digital of the disk drive operations of Samsung and Hitachi respectively, the impact of two natural disasters in Japan and Thailand and the effect of increased competition for drive processing systems. We have seen an increase in demand in respect of our 2012 fiscal year including an estimate of $50 million revenue arising from the replacement of equipment damaged in the Thailand floods. Partly for this reason we believe our HDD capital equipment revenues will increase significantly in our 2012 fiscal year. However, the demand for these products in 2013 and beyond remains uncertain, reflecting continued uncertainty in the underlying demand for HDDs partly due to weak demand in the global economy.

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Over at least the past five years we have seen underlying growth in demand for enterprise data storage products from many of our OEM customers, which we believe relates to factors including increases in the amount of digitally stored information, increased IT spending, growth in the specific markets that our customers address and an increased market share of our customers. Commencing in 2009 we enabled our largest customer, NetApp, to source a proportion of the products we supply under license from a contract manufacturer. This proportion was set at a maximum of 25% for our 2011 fiscal year, increasing to 50% in our 2012 fiscal year and 75% in our 2013 fiscal year. We expect to see other changes in our customer base in 2012 with an anticipated reduction in revenue due to certain customer programs moving to an in-house solution, which we believe will be partially offset by anticipated revenue from the introduction of a number of new products and programs including initial revenue from our new High Performance Computing solution. It is difficult to forecast the net effect of these changes, but we believe our enterprise data storage solutions revenues may continue to fall in our 2012 fiscal year. Over the longer term our revenues with our major customers will significantly depend on our ability to develop and manufacture products that compete well with those provided by contract manufacturers and these customers’ own development efforts.

Foreign Exchange Rate Fluctuations

The functional currency for all our operations is U.S. dollars and the majority of our revenues and cost of revenues are denominated in U.S. dollars. A significant proportion (approximately $73 million in our 2011 fiscal year) of our non-U.S. dollar operating expenses relates to payroll and other expenses of our U.K. operations. To a lesser extent we are also exposed to movements in the Malaysian ringgit relative to the U.S. dollar due to our operations in Malaysia. We manage these exchange rate exposures through the use of forward foreign currency exchange contracts and option agreements. By using these derivative instruments, increases or decreases in our U.K. pound operating expenses resulting from changes in the U.S. dollar to U.K. pound exchange rate are partially offset by realized gains and losses on the derivative instruments.

In previous fiscal years there has been significant volatility in the exchange rate between the U.K. pound and the U.S. dollar. We have hedged the majority of our exposure to this exchange rate movement for approximately one year ahead and we are particularly impacted by the movement in average annual exchange rates. The average value of the U.K. pound relative to the U.S. dollar did not move significantly from 2010 to 2011 and therefore 2012 expenses are not expected to be significantly impacted by changes in exchange rates.

Gross Profit

Our gross profit margins change primarily as a result of fluctuations in our product and customer mix. Our gross margins also change as a result of changes to product pricing, provisions for obsolescence, manufacturing volumes and costs of components.

Operating Expenses

We would generally expect operating expenses to change in line with changes in revenue. In 2011 we experienced a significant fall in HDD capital equipment revenues. In response to this we implemented a cost reduction program to reduce fixed costs where we believe we were able to do so without impacting our competitive position.  We expect the reduction in operating expenses related to this program to be partially offset by our plan to increase expenses related to enterprise data storage solutions. Due to uncertainty in the demand for capital equipment products in 2013 and beyond, we may make further cost reductions in our 2012 fiscal year to reduce expenses supporting these products in our 2013 fiscal year.

Due to the level of competition in the markets in which we operate and the rapid changes in technology, our future revenues are heavily dependent on the improvements we make to our products and the introduction of new products. During our 2011 fiscal year our research and development expenses related to over 67 separate projects covering developing new products, improving existing products, meeting customer specific requirements and entering new markets, such as development of a product to address the high performance computing market and a new product to more effectively test 3.5 inch HDDs.

Share Repurchase Plan and Dividends

We announced in March 2011 that we would recommence the share repurchase plan initially approved during the first quarter of 2008 and increased the maximum value of shares that may be repurchased. According to the revised terms of the plan, we may repurchase up to an additional $50 million of the outstanding shares following April 30, 2011. As of May 31, 2012, we had 27.9 million shares outstanding, having repurchased 3.6 million shares in our 2011 fiscal year at an aggregate cost of $32.3 million and 0.3 million shares in the six months ended May 31, 2012 at an aggregate cost of $3.6 million. These amounts have been deducted from Additional Paid in Capital.

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We began a quarterly dividend payment plan with our first dividend in the third quarter of our 2011 fiscal year. In our 2012 fiscal year to date, we declared cash dividends of $1.8 million or $0.065 per share in February 2012, $2.1 million or $0.075 per share in April 2012, and $2.1 million or $0.075 per share in July 2012. The cash dividends declared in fiscal year 2011 amounted to an aggregate of $0.11 per share and totaled $3.0 million, of which we paid out approximately $1.5 million in fiscal 2011 and the remaining $1.5 million in December 2011.

Provision for Income Taxes

We are subject to taxation primarily in the United Kingdom, the United States and Malaysia.

Our Malaysian operations benefit from a beneficial tax status which has provided us with a zero tax rate on substantially all of our income arising in Malaysia. The beneficial tax status relating to enterprise data storage solutions products was granted in February 2009 and ends in 2017. The beneficial tax status relating to HDD capital equipment products was granted in 2006 and ends in May 2012. We are seeking to obtain future incentives to extend the beneficial arrangements for both product groups and would expect the result of this application to be determined in our 2012 fiscal year. As required by accounting guidance, we have recorded a deferred tax asset of $1.5 million related to our Malaysia operations on the basis that the beneficial tax status is not renewed. If the incentive is renewed the recording of this asset will be reversed and a tax expense of this amount recorded. The beneficial tax status is subject to meeting certain requirements. This amount relates to the 2011 fiscal year and we have determined that this amount should have been recognized in our 2011 financial statements. We have also determined that this amount was not material relative to the year ended November 30, 2011 or to estimated income for the year ending November 30, 2012 and therefore we have corrected this error as an adjustment in the six months ended May 31, 2012.

We have significant loss carryforwards and other deferred tax assets in the United Kingdom and as a result we have not been required to make any significant U.K. tax payments in recent fiscal years. As of November 30, 2011, we retained a deferred tax asset of $15.5 million related to loss carryforwards and other timing differences in the United Kingdom. As of November 30, 2011, we retained a deferred tax asset of $8.2 million related to loss carryforwards and other timing differences in the United States. In the United Kingdom and the United States, we benefit from research and development tax credits.

Results from Continuing Operations

The following table sets forth, for the periods indicated, selected operating data as a percentage of revenues.

Three Months Ended May 31, 2012 Compared to the Three Months Ended May 31, 2011

The following is a tabular presentation of our results of operations for the three months ended May 31, 2012 compared to the three months ended May 31, 2011. Following the table is a discussion and analysis of our business and results of operations for such periods.

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Revenues

The 4.9% decrease in our revenues in the three months ended May 31, 2012 compared to the three months ended May 31, 2011 was attributable to decreased sales of our enterprise data storage products partially offset by increased sales of our HDD capital equipment products.

Revenues from sales of our enterprise data storage products decreased by $22.7 million, or 7.5%. This resulted primarily from a reduction in revenues from certain of our major customers related to changes in their sourcing including a $10.7 million decrease in revenues from our largest customer, NetApp which, in accordance with the agreement we have with it has sourced a greater proportion of the products we supply from an alternative supplier.

Revenues from sales of our HDD capital equipment products increased by $6.3 million, primarily due to increased requirements arising from the floods in Thailand. As stated in the overview, revenue from these products varies significantly from quarter to quarter.

Cost of Revenues and Gross Profit

The $26.1 million, or 8.8%, decrease in cost of revenues in the three months ended May 31, 2012 compared to the three months ended May 31, 2011 was primarily due to lower enterprise data storage solutions revenues. Gross profit increased by 22.1% and as a percentage of revenues, our gross profit was 16.5% for the three months ended May 31, 2012 compared to 12.9% for the three months ended May 31, 2011. This increase was attributable to the increased gross margins in both segments.

The gross margin for our enterprise data storage products increased to 16.3% in the three months ended May 31, 2012 from 14.9% in the three months ended May 31, 2011. This was primarily due to one of our major customers purchasing products without HDDs due to disk drive supply constraints. In addition, a number of changes to customer mix improved gross margin, partially offset by the effect of fixed costs relative to lower volumes.

The gross margin for HDD capital equipment products increased to 19.0% in the three months ended May 31, 2012, from negative 2.7% in the three months ended May 31, 2011. This increase resulted from three main factors. Firstly, changes in product mix increased gross margin by 10.0%. Revenue in the prior year included early stage products that were in the higher cost introductory phase. Secondly, a reduction in overheads relative to higher revenues increased gross margin by 6.2%. Thirdly reduced inventory write-downs increased gross margin by 5.5%.

In measuring the performance of our business segments from period to period without variations caused by special or unusual items, we focus on gross profit by product group, which excludes a non-cash equity compensation charge of $0.4 million for the three months ended May 31, 2012 and $0.1 million for the three months ended May 31, 2011. See Note 12 to our unaudited condensed consolidated financial statements for a description of our segments and how we measure segment performance.

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Research and Development

The $2.7 million, or 9.1%, decrease in research and development expense in the three months ended May 31, 2012 compared to the three months ended May 31, 2011 resulted primarily from a decrease in the number of employees of 9.8%. This was associated with a cost reduction exercise undertaken in response to the lower demand for HDD capital equipment products described in the overview above.

Selling, General and Administrative

Selling, general and administrative expense decreased by $1.0 million, or 5.6%, in the three months ended May 31, 2012 compared to the three months ended May 31, 2011. The decrease primarily resulted from reduced employee bonuses. Part of a provision for employee bonuses for the fiscal year 2011, amounting to $0.8 million, was released in the three months ended May 31, 2012 as this amount was not ultimately awarded. The Company has also determined that this amount was not material relative to the year ended November 30, 2011 or to estimated income for the year ending November 30, 2012 and therefore has corrected this error as an adjustment in the six months ended May 31, 2012.

Provision (Benefit) for Income Taxes

The provision for income taxes in the three months ended May 31, 2012 is based on our current estimate of the effective tax rate based on a forecast of income before taxes for the year ending November 30, 2012. The benefit for income taxes in the three months ended May 31, 2011 was based on the Company’s estimate of the effective tax rate based on a forecast of income before taxes for the year ended November 30, 2011.

Net Income

The most significant contributors towards the recording of net income of $7.0 million for the three months ended May 31, 2012 compared to a net loss of $4.6 million for the three months ended May 31, 2011, were the increase in gross margins and reduction in research and development expense.

Six Months Ended May 31, 2012 Compared to the Six Months Ended May 31, 2011

The following is a tabular presentation of our results of operations for the six months ended May 31, 2012 compared to the six months ended May 31, 2011. Following the table is a discussion and analysis of our business and results of operations for such periods.

Revenues

The 11.6% decrease in our revenues in the six months ended May 31, 2012 compared to the six months ended May 31, 2011 was primarily attributable to decreased sales of our enterprise data storage products.

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Revenues from sales of our enterprise data storage products decreased by $84.8 million, or 13.4%. This resulted primarily from a reduction in revenues from certain of our major customers related to changes in their sourcing including a $63 million decrease in revenues from our largest customer, NetApp, which sourced a greater proportion of the products we supply from an alternative supplier.

Revenues from sales of our HDD capital equipment products increased by $3.6 million, or 5.6% primarily due to increased requirements arising from the floods in Thailand. As described in the overview, revenues from these products vary significantly from quarter.

Cost of Revenues and Gross Profit

The decrease in cost of revenues and in gross profit in the six months ended May 31, 2012 compared to the six months ended May 31, 2011 were primarily due to lower enterprise data storage revenues. As a percentage of revenues, our gross profit was 17.2% for the six months ended May 31, 2012 compared to 13.3% for the six months ended May 31, 2011. This change was attributable to increased margins in both segments.

The gross margin for our enterprise data storage products increased to 16.8% in the six months ended May 31, 2012 from 14.5% in the six months ended May 31, 2011. The movement primarily resulted from a number of changes to customer and product mix. These changes include a 1.4% benefit from one of our major customers purchasing products without HDDs due to disk drive supply constraints. These increases were partially offset by the effect of fixed costs relative to lower volumes.

The gross margin for HDD capital equipment products increased to 21.3% in the six months ended May 31, 2012, from 2.4% in the six months ended May 31, 2011. This increase resulted from three main factors. Firstly, changes in product mix improved gross margin in 2012 by approximately 9%. 2011 revenue included early stage products that were still in the higher cost introductory phase. Secondly, the effect of fixed costs relative to lower volumes increased gross margin by approximately 7%. Thirdly reduced inventory write-downs increased gross margin.

In measuring the performance of our business segments from period to period without variations caused by special or unusual items, we focus on gross profit by product group, which excludes a non-cash equity compensation charge of $0.5 million for the six months ended May 31, 2012 and $0.6 million for the six months ended May 31, 2011. See Note 12 to our unaudited condensed consolidated financial statements for a description of our segments and how we measure segment performance.

Research and Development

The $6.3 million or 10.8% decrease in research and development expense in the six months ended May 31, 2012 compared to the six months ended May 31, 2011 resulted from a decrease in external project costs of $4.3 million and a decrease in the number of employees of 8%. These were primarily associated with a cost reduction exercise undertaken in response to the lower demand for HDD capital equipment products described in the overview above.

Selling, General and Administrative

Selling, general and administrative expense decreased by $1.7 million or 4.8% in the six months ended May 31, 2012 compared to the six months ended May 31, 2011. The decrease primarily resulted from a decreased provision for employee bonuses.

Provision (benefit) for Income Taxes

The provision for income taxes in the six months ended May 31, 2012 primarily relates to the Company’s current estimate of the effective tax rate based on a forecast of income before taxes for the year ending November 30, 2012. This is partially offset by a $1.5 million benefit from the recognition of a deferred tax asset for our Malaysian operations as described in the overview. The benefit for income taxes in the six months ended May 31, 2011 primarily relates to a $2.2 million benefit resulting from the completion of an investigation into U.K. tax returns for 2007 and 2008.

Net Income

The most significant contributors towards the recording of net income of $17.9 million for the six months ended May 31, 2012 compared to a net income of $0.1 million for the six months ended May 31, 2011, were the increase in gross margins for HDD capital equipment products and the $8.1 million decrease in operating expenses.

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Non-GAAP Financial Measures

The following discussion and analysis of our results of operations include certain non-GAAP financial measures as identified in the reconciliation below. The intention in providing these non-GAAP measures is to provide supplemental information regarding our operational performance while recognizing that they have material limitations and that they should only be referred to, with reference to, and not considered to be a substitute for, or superior to, the corresponding GAAP measure. The financial results calculated in accordance with GAAP and reconciliations of these non-GAAP measures to the comparable GAAP measures should be carefully evaluated. The non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

We believe that the provision of these non-GAAP financial measures is useful to investors and investment analysts because it enables comparison to the Company’s historical operating results, those of competitors and other industry participants and also provides transparency to the measures used by management in operational and financial decision making. In relation to the specific items excluded: (a) intangible assets represent costs incurred by the acquired business prior to acquisition, are not cash costs and will not be replaced when the assets are fully amortized and therefore the exclusion of these costs provides management and investors with better visibility of the costs required to generate revenue over time; (b) equity compensation expense is non-cash in nature and is outside the control of management during the period in which the expense is incurred, (c) the exclusion of the related tax effects of excluding items (a) and (b) is necessary to show the effect on net income (loss) of the change in tax expense that would have been recorded if these items had not been incurred and (d) the recognition of the Malaysia deferred tax asset relates to the potential for the non-renewal of certain tax incentive arrangements in 2012. Item (d) is non-recurring and will reverse if the incentive arrangements are renewed.

Included in the table below is a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as provided above.

On a non-GAAP basis, a net income of $9.3 million was recorded for the three months ended May 31, 2012 compared with the recording of net loss of $1.9 million for the three months ended May 31, 2011 and diluted earnings per share was $0.32 compared with loss per share of $0.06. These increases were a result of the same factors described above in the section “— Three Months Ended May 31, 2012 Compared to the Three Months Ended May 31, 2011.”

On a non-GAAP basis, a net income of $20.7 million was recorded for the six months ended May 31, 2012 compared with $5.6 million for the six months ended May 31, 2011 and diluted earnings per share was $0.72 compared with $0.18. These increases were a result of the same factors described above in the section “— Six Months Ended May 31, 2012 Compared to the Six Months Ended May 31, 2011.”

Liquidity and Capital Resources

We finance our operations primarily through cash balances and cash flow from operations.

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Cash flows

Net cash provided by operating activities was $18.0 million in the six months ended May 31, 2012, compared to $65.8 million in the six months ended May 31, 2011.

Cash provided by operating activities of $18.0 million for the six months ended May 31, 2012 resulted from net income after excluding net non-cash charges of $32.8 million, offset by an increase in working capital of $14.7 million. The increase in working capital primarily related to an increase in inventory of $16.2 million and a decrease in accounts payable of $33.4 million. These were partially offset by a decrease in accounts receivable of $37.1 million. The changes in accounts payable and receivable resulted from the reduction in revenues. The increase in inventory related primarily to a change in the supply model of HDDs, resulting from supply constraints, and increased orders for HDD capital equipment products.  In addition cash was provided by a $7.6 million increase in deferred revenue related to the increase in customer orders for capital equipment products and cash was used due to a $7.3 million decrease in employee compensation and benefits payable, primarily related to the payment of annual employee bonuses.

Cash provided by operating activities of $65.8 million for the six months ended May 31, 2011 resulted from net income after excluding net non-cash charges of $12.9 million and a decrease in working capital of $52.9 million. The decrease in working capital related to decreases in inventory and accounts receivable of $42.9 million and $32.3 million respectively partially offset by increases in accounts payable of $10.8 million. These were partially offset by the effects of a $6.7 million decrease in employee compensation and benefits payable, primarily related to the payment of an employee bonus and a $7.0 million decrease in deferred revenue, primarily related to the reduction in customer orders.

Net cash used in investing activities for the six months ended May 31, 2012 amounted to $10.5 million. This amount included $7.0 million related to capital expenditure. The remaining balance of $3.5 million related to the final payment for a patent cross license. Net cash used in investing activities for the six months ended May 31, 2011 amounted to $22.0 million. This amount included $6.1 million related to an acquisition in the period, $3.5 million related to the purchase of patents and $1.2 million related to the purchase of a software license. The remaining balance of $11.2 million related to capital expenditure.

Our capital expenditures relate primarily to purchases of equipment such as tooling, production lines and test equipment. We would expect our capital expenditure to generally change in line with our revenues.

Net cash used in our financing activities was $8.4 million in the six months ended May 31, 2012, being $5.5 million of dividends paid to our shareholders and $3.6 million relating to the repurchase of shares under our share buy back program as described in the overview. Net cash used in our financing activities was $7.7 million in the six months ended May 31, 2011. This amount includes $5.3 million for the repurchase of shares and $2.4 million relating to a decrease in a book overdraft.

Liquidity

As of May 31, 2012, our principal source of liquidity consisted of cash and cash equivalents of $131.8 million. Our cash and cash equivalents are denominated primarily in U.S. dollars and held in variable interest liquidity funds and bank deposits. Our future financing requirements will depend on many factors, but are particularly affected by our ability to generate profits, changes in revenues and associated working capital requirements, changes in the payment terms with our major customers and suppliers of disk drives and quarterly fluctuations in our revenues. Additionally, our cash flow could be significantly affected by any acquisitions we might choose to make. We believe that our cash and cash equivalents will be sufficient to meet our cash requirements at least through the next 12 months.

Accounting Policies

Critical Accounting Policies

Our critical accounting policies are set out in our Annual Report on Form 20-F as filed with the Securities and Exchange Commission on February 24, 2012. By “critical accounting policies” we mean policies that are both important to the portrayal of our financial condition and financial results and require critical management judgments and estimates about matters that are inherently uncertain. Although we believe that our judgments and estimates are appropriate, actual future results may differ from our estimates.

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Recent Accounting Pronouncement

In June 2011, the FASB issued new guidance related to the presentation of comprehensive income. An entity can elect to present items of net income and other comprehensive income on one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive, statements. The statements would need to be presented with equal prominence as the other primary financial statements. The items that constitute net income and other comprehensive income do not change. This guidance is effective for annual periods beginning after December 15, 2011. The adoption of the guidance is not expected to have a material impact on our consolidated financial statements.

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XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements

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XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements

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XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(US dollars and amounts, in thousands)

The accompanying notes are an integral part of these consolidated financial statements.

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XYRATEX LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements

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XYRATEX LTD

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(US dollars and amounts in thousands, except per share data, unless otherwise stated)

1.    The Company and its Operations

Xyratex Ltd together with its subsidiaries (“the Company”) is a leading provider of data storage technology with principal operations in the United Kingdom (“U.K.”), the United States of America (“U.S.”) and Malaysia. The Company reports its operations in two product groups: Enterprise Data Storage Solutions (previously Networked Storage Solutions or NSS) and Hard Disk Drive (“HDD”) Capital Equipment (previously Storage Infrastructure or SI). Our Enterprise Data Storage Solutions products are primarily HDD based data storage subsystems and solutions which we supply to Original Equipment Manufacturers (“ OEMs”). Our HDD Capital Equipment products are process, inspection and test equipment which we supply to the hard disk drive industry. During 2012 the Company has changed the title of its operating segments to reflect the markets in which it operates, but has not made any other changes to its segment reporting.

2.    Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S.

These condensed consolidated financial statements are unaudited but include all adjustments (consisting of normal recurring adjustments) that the Company’s management considers necessary for a fair presentation of the financial position as of such dates and the operating results and cash flows for those periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted. In addition, the results of operations for the interim periods may not necessarily be indicative of the operating results that may be incurred for the entire year.

The November 30, 2011 balance sheet was derived from audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the U.S. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Form 20-F as filed with the Securities and Exchange Commission on February 24, 2012.

3.    Equity Compensation Plans

The following table summarizes equity compensation expense related to share-based awards:

The Company’s share based awards primarily consist of Restricted Stock Units (“RSUs”). The Company also operates an Employee Share Purchase Plan (“ESPP”) for U.S. employees and a Sharesave option plan (“Sharesave Plan”) for U.K. employees. As of June 30, 2012, there were 3,200 shares authorized for future grants under all share plans.

Restricted Stock Units

RSUs generally require that shares be awarded over four years from the date of grant, subject to continued service. The vesting of these units is also generally subject to the achievement of certain performance conditions in the year of grant. The holders of RSUs do not hold rights to dividends or dividend equivalents. Equity compensation expense relating to RSUs totaling $3,681 has been recorded in the six months ended May 31, 2012.  Restricted stock units granted, exercised, canceled and expired are summarized as follows:

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Share Option Activity

The Company has four plans under which employees were granted options to purchase Xyratex Ltd shares prior to 2006. The number of options outstanding and exercisable under these plans at May 31, 2012 was 459 with a weighted average exercise price of $14.03, weighted average remaining contractual term of 2.6 years and an aggregate intrinsic value of $454. In the six months ended May 31, 2012, 66 options were exercised with a weighted average exercise price of $4.22.

Employee Stock Purchase Plan and Sharesave Plan

Employees contributed approximately $370 to awards granted under the ESPP and Sharesave Plan. No shares were issued under the Sharesave Plan and 39 were issued under the ESPP in the six months ended May 31, 2012.

4.    Net Earnings (Loss) per Share

Basic net earnings (loss) per share for the three and six month periods ended May 31, 2012 and May 31, 2011 is computed by dividing net income (loss) by the weighted-average number of common shares. Diluted net earnings (loss) per share gives effect to all potentially dilutive common share equivalents outstanding during the period.