Western Digital 2007 Annual Report Download - page 26

limit the total volume of hard drives we are able to manufacture and result in a loss of sales and revenue and harm our
operating results. Similarly, a localized health risk affecting our employees or the staff of our suppliers, such as a new
pandemic influenza in Asia, could impair the total volume of hard drives that we are able to manufacture.
Our head manufacturing operations include a single wafer fabrication facility in Fremont, California and a single head
gimbal assembly facility in Bang Pa-In, Thailand, and our planned media operations will include four facilities in
Malaysia, which subjects us to substantial risk of damage or loss if operations at either of these facilities are disrupted.
As we have previously discussed in public statements, our business plan presently contemplates that we plan to
design and manufacture approximately 70% to 80% of the heads required for the hard drives we manufacture. We
fabricate wafers in our Fremont, California facility, and the wafers are then sent to our Thailand facility for slider
fabrication and wafer slicing and HGA assembly and testing. Additionally, following our planned acquisition of Komag,
we will manufacture the majority of our media and substrates in Malaysia facilities. A fire, flood, earthquake or other
disaster, condition or event such as a power outage that adversely affects our facilities in Fremont, California or Bang Pa-
In, Thailand, or in Malaysia following our planned acquisition of Komag, would significantly affect supply of our heads
or media, respectively, and limit our ability to manufacture hard drives which would result in a substantial loss of sales
and revenue and a substantial harm to our operating results.
Following our planned acquisition of Komag, if we fail to successfully integrate Komag’s business into our operations in the
expected time frame, or at all, it may adversely affect our future results.
We believe that our planned acquisition of Komag will result in certain benefits, including certain cost, operational
and other efficiencies and synergies. The success of our planned acquisition will be dependent on our ability to realize the
anticipated benefits from vertically integrating Komag’s business into our operations and Komag’s media technology
with our head technology. Following the planned acquisition, we may fail to realize the anticipated benefits on a timely
basis, or at all, for a variety of reasons, including the following:
• potential incompatibility of Komag’s operating systems with our operating systems;
• failure to integrate Komag’s media technology with our head technology, or failure to leverage such integration,
quickly and effectively;
• failure to successfully manage relationships with Komag’s suppliers;
• failure to successfully manage relationships with Komag’s other customers and the possibility of unanticipated
claims from such parties;
• failure to successfully manage relationships with our other media suppliers;
• potential difficulties integrating and harmonizing financial reporting systems; and
• the loss of key employees.
If we are not able to successfully integrate Komag’s business and technology into our operations, the anticipated
benefits and efficiencies of the planned acquisition may not be realized fully or at all, or may take longer to realize than
expected, and our ability to compete, our profit margins and our results of operations may be adversely affected.
The successful completion of our planned acquisition of Komag is subject to risks and uncertainties and in the event we fail to
complete the acquisition our stock price could suffer and our relationship with vendors and customers may be adversely impacted.
Our ability to complete the planned acquisition of Komag is subject to risks and uncertainties, including, but not limited
to, the risk that a condition to closing of the transaction may not be satisfied and the risk that we fail to obtain the financing
necessary to complete the transaction. There is also no assurance that an adequate number of Komag shares will be validly
tendered, and not withdrawn, in the tender offer sufficient to satisfy our minimum tender offer condition. In the event that the
tender offer or merger is not completed or is delayed, the current market price of our common stock may decline if based on an
assumption that the merger will occur as contemplated during the third calendar quarter of 2007. Additionally, these
uncertainties regarding the merger may adversely affect our relationships with our vendors and customers.
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