Western Digital 2000 Annual Report Download - page 33

The market price of our common stock is volatile.
The market price of our common stock has been, and may continue to be, extremely volatile. Factors
such as the following may signiÑcantly aÅect the market price of our common stock:
‚ actual or anticipated Öuctuations in our operating results
‚ announcements of technological innovations by us or our competitors which may decrease the volume
and proÑtability of sales of our existing products and increase the risk of inventory obsolescence
‚ new products introduced by us or our competitors
‚ periods of severe pricing pressures due to oversupply or price erosion resulting from competitive
pressures
‚ developments with respect to patents or proprietary rights
‚ conditions and trends in the hard drive, data and content management, storage and communication
industries
‚ changes in Ñnancial estimates by securities analysts relating speciÑcally to us or the hard drive industry
in general.
In addition, the stock market in recent months has experienced extreme price and volume Öuctuations
that have particularly aÅected the stock price of many high technology companies. These Öuctuations are
often unrelated to the operating performance of the companies.
Securities class action lawsuits are often brought against companies after periods of volatility in the
market price of their securities. A number of such suits have been Ñled against us in the past, and any of these
litigation matters could result in substantial costs and a diversion of resources and management's attention.
We may be unable to raise future capital through debt or equity Ñnancing.
Due to our recent Ñnancial performance and the risks described in this Report, in the future we may be
unable to maintain adequate Ñnancial resources for capital expenditures, working capital and research and
development. Our prior borrowing agreement with our banks matured on March 31, 2000, and we have signed
an agreement for a new credit facility for our HDS division. If we decide to increase or accelerate our capital
expenditures or research and development eÅorts, or if results of operations do not meet our expectations, we
could require additional debt or equity Ñnancing. However, we cannot insure that additional Ñnancing will be
available to us or available on favorable terms. An equity Ñnancing could also be dilutive to our existing
stockholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Disclosure About Foreign Currency Risk
Although the majority of the Company's transactions are in U.S. Dollars, some transactions are based in
various foreign currencies. From time to time, the Company purchases short-term, forward exchange contracts
to hedge the impact of foreign currency Öuctuations on certain underlying assets, liabilities and commitments
for operating expenses denominated in foreign currencies. The purpose of entering into these hedge
transactions is to minimize the impact of foreign currency Öuctuations on the results of operations. A majority
of the increases or decreases in the Company's local currency operating expenses are oÅset by gains and losses
on the hedges. The contracts have maturity dates that do not exceed twelve months. The unrealized gains and
losses on these contracts are deferred and recognized in the results of operations in the period in which the
hedged transaction is consummated. The Company does not purchase short-term forward exchange contracts
for trading purposes.
Historically, the Company has focused on hedging its foreign currency risk related to the Singapore
Dollar, the British Pound and the Malaysian Ringgit. With the establishment of currency controls and the
prohibition of purchases or sales of the Malaysian Ringgit by oÅshore companies, the Company discontinued
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