Western Digital 1999 Annual Report Download - page 33

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Bowne Conversion 28
Our reliance on intellectual property and other proprietary information subjects us to the risk that these key ingredients of our
business could be copied by competitors.
Our success depends, in significant part, on the proprietary nature of our technology, including our non-patentable intellectual
property such as our process technology. Despite safeguards, to the extent that a competitor is able to reproduce or otherwise
capitalize on our technology, it may be difficult, expensive or impossible for us to obtain necessary legal protection. Also, the laws of
some foreign countries may not protect our intellectual property to the same extent as do the laws of the United States. In addition to
patent protection of intellectual property rights, we consider elements of our product designs and processes to be proprietary and
confidential. We rely upon employee, consultant and vendor non-disclosure agreements and a system of internal safeguards to protect
our proprietary information. However, we cannot insure that our registered and unregistered intellectual property rights will not be
challenged or exploited by others in the industry.
Inaccurate projections of demand for our product can cause large fluctuations in our quarterly results.
If we do not forecast total quarterly demand accurately, it can have a material adverse effect on our quarterly results. We typically
book and ship a high percentage of our total quarterly sales in the third month of the quarter, which makes it is difficult for us to match
our production plans to customer demands. In addition, our quarterly projections and results may in the future be subject to significant
fluctuations as a result of a number of other factors including:
•the timing of orders from and shipment of products to major customers
•our product mix
•changes in the prices of our products
•manufacturing delays or interruptions
•acceptance by customers of competing products in lieu of our products
•variations in the cost of components for our products
•limited access to components that we obtain from a single or a limited number of suppliers, such as IBM or Komag
•competition and consolidation in the data storage industry
•seasonal and other fluctuations in demand for computers often due to technological advances.
Rapidly changing market conditions in the hard drive industry make it difficult to estimate actual results.
We have made and continue to make a number of estimates and assumptions relating to our consolidated financial reporting. The
rapidly changing market conditions with which we deal means that actual results may differ significantly from our estimates and
assumptions. Key estimates and assumptions for us include:
•accruals for warranty against product defects
•price protection adjustments on products sold to resellers and distributors
•inventory adjustments for write-down of inventories to fair value
•reserves for doubtful accounts
•accruals for product returns.
The market price of our common stock is volatile.