Western Digital 1998 Annual Report Download - page 30

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Several Asian countries recently have had large economic downturns and significant declines in the value of their
currencies relative to the U.S. Dollar. The "Asian crisis" has reduced the market for the Company's products as well
as helped some Asian hard drive companies become more competitive since they can pay some of their costs in
devalued currency while receiving their revenue in U.S. Dollars. The Company is unable to predict what effect, if any,
the factors associated with the Asian crisis will have on foreign economic conditions, the Company's customers or
vendors or the Company's ability to compete in the Asian market.
Price Volatility of Common Stock
The market price of the Company's common stock has been, and may continue to be, extremely volatile and may be
significantly affected by factors such as actual or anticipated fluctuations in the Company's operating results,
announcements of technological innovations, new products introduced by the Company or its competitors, periods of
severe pricing pressures, developments with respect to patents or proprietary rights, conditions and trends in the hard
drive industry, changes in financial estimates by securities analysts, general market conditions and other factors. In
addition, the stock market has experienced extreme price and volume fluctuations that have particularly affected the
market price for many high technology companies that have often been unrelated to the operating performance of these
companies. These broad market fluctuations may adversely affect the market price of the Company's common stock,
and there can be no assurance that the market price of the common stock will not decline.
Future Capital Needs
The hard drive industry is capital intensive, and in order to remain competitive, the Company will need to maintain
adequate financial resources for capital expenditures, working capital and research and development. If the Company
decides to increase its capital expenditures further, or sooner than presently contemplated, or if results of operations
do not meet the Company's expectations, the Company could require additional debt or equity financing, and such
equity financing could be dilutive to the Company's existing shareholders. There can be no assurance that such
additional funds will be available to the Company or available on favorable terms. The Company may also require
additional capital for other purposes not presently contemplated. If the Company is unable to obtain sufficient capital,
it could be required to curtail its capital equipment and research and development expenditures, which could
adversely affect the Company's financial condition or operating results. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations — Liquidity and Capital Resources."
Foreign Exchange Contracts
The Company manages the impact of foreign currency exchange rate changes on certain underlying assets,
liabilities and commitments for operating expenses denominated in foreign currencies by entering into short-term,
forward exchange contracts. With this approach, the Company expects to minimize the impact of changing foreign
exchange rates on the Company's operations. However, there can be no assurance that all foreign currency exposures
will be adequately covered, and that the Company's financial condition or operating results will not be affected by
changing foreign exchange rates.