Western Digital 2008 Annual Report Download - page 32

• increasing labor and overhead costs; and
• loss or non-renewal of favorable tax treatment under agreements or treaties with foreign tax authorities.
Terrorist attacks may adversely affect our business and operating results.
The continued threat of terrorist activity and other acts of war or hostility have created uncertainty in the financial
and insurance markets and have significantly increased the political, economic and social instability in some of the
geographic areas in which we operate. Additionally, it is uncertain what impact the reactions to such acts by various
governmental agencies and security regulators worldwide will have on shipping costs. Acts of terrorism, either
domestically or abroad, could create further uncertainties and instability. To the extent this results in disruption or
delays of our manufacturing capabilities or shipments of our products, our business, operating results and financial
condition could be adversely affected.
Sudden disruptions to the availability of freight lanes could have an impact on our operations.
We ship the majority of our products to our various customers via air freight. The sudden unavailability of air cargo
operations used to ship our products would impair our ability to deliver our products in a timely and efficient manner,
which could adversely impact our operating results. We also ship a portion of our product via ocean freight, and events or
conditions at shipping ports, such as labor difficulties or disputes, could also impact our operating results by impairing
our ability to timely and efficiently deliver these products.
We are vulnerable to system failures, which could harm our business.
We are heavily dependent on our technology infrastructure, among other functions, to operate our factories, sell our
products, fulfill orders, manage inventory and bill, collect and make payments. Our systems are vulnerable to damage or
interruption from natural disasters, power loss, telecommunication failures, computer viruses, computer denial-of-
service attacks and other events. Our business is also subject to break-ins, sabotage and intentional acts of vandalism by
third parties as well as employees. Despite any precautions we may take, such problems could result in, among other
consequences, interruptions in our business, which could harm our reputation and financial condition.
We may be unable to retain our key staff and skilled employees.
Our success depends upon the continued contributions of our key staff and skilled employees, many of whom would
be extremely difficult to replace. Worldwide competition for skilled employees in the hard drive industry is intense.
Volatility or lack of positive performance in our stock price may adversely affect our ability to retain key staff or skilled
employees who have received equity compensation. If we are unable to retain our existing key staff or skilled employees,
or hire and integrate new key staff or skilled employees, or if we fail to implement succession plans for our key staff, our
operating results would likely be harmed.
The nature of our business and our reliance on intellectual property and other proprietary information subjects us to the risk of
significant litigation.
The hard drive industry has been characterized by significant litigation. This includes litigation relating to patent
and other intellectual property rights, product liability claims and other types of litigation. Litigation can be expensive,
lengthy and disruptive to normal business operations. Moreover, the results of litigation are inherently uncertain and may
result in adverse rulings or decisions. We may enter into settlements or be subject to judgments that may, individually or
in the aggregate, have a material adverse effect on our business, financial condition or operating results.
We evaluate notices of alleged patent infringement and notices of patents from patent holders that we receive from
time to time. If claims or actions are asserted against us, we may be required to obtain a license or cross-license, modify
our existing technology or design a new non-infringing technology. Such licenses or design modifications can be
extremely costly. In addition, we may decide to settle a claim or action against us, which settlement could be costly. We
may also be liable for any past infringement. If there is an adverse ruling against us in an infringement lawsuit, an
injunction could be issued barring production or sale of any infringing product. It could also result in a damage award
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