Western Digital 2000 Annual Report Download - page 4

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We took a number of actions to improve the efficiencies and improve our focus in the hard drive
business. We consolidated three drive manufacturing operations into a single, high-efficiency facility in
Malaysia. Over the course of eight quarters, we reduced our labor and overhead costs by more than 50%. We
exited the enterprise hard drive business, which was demanding huge investments in a market dominated by
two larger competitors, and we shifted our resources in the enterprise space to Internet-related storage network
management and supply chain data analysis where growth rates and margins are higher.
Cost and expense reduction efforts were redoubled with great effect: by year’s end, operating expenses
had fallen nearly 30%; over a two year period, operating expenses have been reduced 50%.
Today, Western Digital is again winning quality accolades and increased business volume from the
industry’s leading OEM companies. We have largely rebuilt our volume levels with the top five multinational
PC suppliers, and attained number one supplier ratings at the world’s two leading PC makers.
This spring, Western Digital aligned with a number of these leading PC makers and other IT industry
leaders including AMD, Compaq, Gateway and Hewlett-Packard to form an open Internet exchange for PC
components, eHITEX. This new B2B marketplace enables buyers and sellers involved in the computing and
electronics-related industry to manage their supply chains more effectively, reduce costs, improve delivery of
products and services, and increase customer satisfaction.
The rapid growth of cable and satellite broadcasting and digital music and video recording has opened
vast new markets for Western Digital’s specialized home entertainment products and core
competencies. These non-traditional markets for hard drives are forecasted by IDC to grow at
greater than 90% compound annual growth rate from 1999 through 2004. The company
has active relationships with all of the major cable operators, set top box manufacturers
and gaming box companies — the segments that are expected to provide the early growth
in this exciting new market for hard drives. Equipped with WD-exclusive StreamWeaver™and
WhisperDrive™technologies for data streaming and acoustics control in high-performance audio/visual
applications, WD Performer™hard drives are designed for each of these applications and other consumer
products. A major endorsement for these drives was their selection by Microsoft WebTV Networks, Inc. for
use in its UltimateTV service as part of an advanced RCA DIRECTV system.
In fiscal year 2000 and early 2001, Western Digital launched two promising operations addressing new
markets. Connex, a developer of network storage solutions, enables companies to efficiently fulfill their
departmental storage requirements, as well as evolve from simple network-attached storage systems to