Western Digital 1996 Annual Report Download - page 4

Western Digital had an excellent year in fiscal 1996, our best by far in
revenues and our second-best in net income in the history of the Company. We gained signifi-
cant market share, strengthened our already strong balance sheet, solidified our total focus on
the hard drive business and made substantial investments to lay the groundwork for the future.
Our people made further strides in improving the quality and reliability of our products, the
efficiency of Western Digital’s operations and the level of their professional skills. All this was
accomplished while the Company operated in the highly competitive desktop segment of the
hard drive industry.
We continued our high-velocity turnover of assets in fiscal 1996, with the result that Western
Digital returned 11.8 percent of operating income to operating assets, and 10.7 percent and
21.3 percent of net income to total assets and shareholders’equity, respectively. The Company
produced $26 in sales per dollar of investment in property, plant and equipment, more than
twice the average for our industry.
Western Digital set records in unit shipments and revenues for the ninth consecutive year.
We produced 15.3 million hard drives, including our first in 2.1- and 2.5-gigabyte capacities.
Manufacturing capacity for desktop drives has been increased substantially by more than
doubling the capacity of our facility in Malaysia and by productivity improvements in our
Chai Chee Singapore plant, as well as through additions and improvements in our California
media-production facility.
We announced our first enterprise products shortly after the fiscal year’s end—products
designed for networks, servers and large systems. This step is designed to broaden our market
coverage of present and prospective customers and enhance the Company’s long-term earning
potential. We are confident that this step will prove as strategically important to Western
Digital as our decision to enter the hard drive business in 1988.
Our first enterprise products are SCSI drives in 2.1- and 4.3-gigabyte capacities. The high-
performance SCSI hard drive segment aimed at servers, workstations and network applications
is forecast to grow 18 percent in 1997. Applications like these are expected to account for
about a fourth of the drive industry’s projected $33 billion in revenue in 1997 and a much
larger share of its operating earnings.
By the time of their public introduction, our high-end enterprise units were undergoing
analysis in many customer applications. A new Singapore manufacturing facility dedicated to
enterprise products began operations in April, assembling desktop hard drives. The new plant
is now fully debugged and is providing useful experience in production methods and quality
assurance for its workers. This also enables both of our operating groups to balance workflows
during the introduction of WD Enterprise products.
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To Our Shareholders: