Western Digital 1999 Annual Report Download - page 29

Bowne Conversion 24
are expected to amount to approximately $13 million in total. For an additional discussion of Year 2000 issues, see "Risk factors relating
to Western Digital particularly."
Risk factors related to the hard drive industry in which we operate.
Our operating results depend on our being among the first-to-market and first-to-volume with our new products.
To achieve consistent success with computer manufacturer customers we must be an early provider of next generation hard drives
featuring leading technology and high quality. If we fail to:
•consistently maintain and improve our time-to-market performance with our new products
•produce these products in sufficient volume within our rapid product cycle
•qualify these products with key customers on a timely basis by meeting our customer's performance and quality specifications,
or
•achieve acceptable manufacturing yields and costs with these products
then our market share would be adversely affected, which would harm our operating results.
Short product life cycles force us to continually qualify new products with our customers.
Due to short product life cycles, we must regularly engage in new product qualification with our customers. To be considered for
qualification we must be among the leaders in time-to-market with our new products. Once a product is accepted for qualification
testing, any failure or delay in the qualification process can result in our losing sales to that customer until the next generation of
products is introduced. The effect of missing a product qualification opportunity is magnified by the limited number of high volume
computer manufacturers, most of which continue to consolidate their share of the PC and enterprise markets. This issue is particularly
acute in the enterprise portion of the market because the product life cycles for enterprise hard drives are longer than those for desktop
drives. These risks are magnified because we expect technological changes, short product life cycles and intense competitive pressures
to result in declining sales and gross margins on our current generation products.
We must complete our transition to giant magnetoresistive head technology.
We began the transition to giant magnetoresistive head technology in 1999, and all of our new products in 2000 will incorporate this
technology. Unlike our transition to magnetoresistive technology in 1998, when we lagged behind the industry leaders, we believe that
we are among the industry leaders in making this latest technology transition. However, if we are unable to complete this technology
transition while remaining among the first in time-to-market and time-to-volume with these new products, our operating results could be
harmed.
Unexpected technology advances in the hard drive industry could harm our competitive position.
If one of our competitors were able to implement a significant advance in head or disk drive technology that enables a step-change
increase in areal density allowing greater storage of data on a disk, it would harm our operating results.
Advances in magnetic, optical, semiconductor or other data storage technologies could result in competitive products that have
better performance or lower cost per unit of capacity than our products. Some of our competitors are developing hybrid storage devices
that combine magnetic and optical technologies, but we have decided not to pursue this technology at this time. If these products
prove to be superior in performance or cost per unit of capacity, we could be at a competitive disadvantage to the companies offering
those products.
The hard drive industry is highly competitive and characterized by rapid shifts in market share among the major competitors.