Western Digital 2000 Annual Report Download - page 9

Download and view the complete annual report

Please find page 9 of the 2000 Western Digital annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 78

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78

both commercial and consumer environments. The demand for hard drive capacity continues to grow in part
due to:
‚ continued improvements in desktop computing price to performance ratios;
‚ continued growth of the sub-$1,000 PC market;
‚ the rapid accumulation of data resulting from the digitization of information previously stored in paper
form;
‚ larger Ñle sizes created by multimedia-intensive applications such as high-Ñdelity audio and video; and
‚ the exchange of increasing volumes of digital content among users across the Internet and intranets
with the proliferation of collaborative computing and sharing of audio and video content.
Future demand growth for desktop computer hard drives also may be driven by new and emerging hard
drive markets. In August 2000, International Data Corporation forecasted that the worldwide desktop
computer hard drive market would grow from approximately 133 million units in calendar 1999 to 247 million
units in calendar 2004, reÖecting a compound annual growth rate of approximately 13.2%. However, it
forecasts that revenue growth will only be approximately 3.6% through calendar 2004, reÖecting the impact of
severe price competition. See Part II, Item 7, under the heading ""Risk factors related to the hard drive
industry in which we operate.''
Desktop PCs are used in a number of environments, ranging from homes to businesses and multi-user
networks. Software applications are used on desktop PCs primarily word processing, spreadsheet, desktop
publishing, database management, multimedia, entertainment and other related applications. Desktop PCs
typically utilize the Enhanced Integrated Drive Electronics (""EIDE'') interface for their hard drives. The
Company believes the minimum storage requirements in the past year for entry-level PCs were generally
6.8 GB to 10.2 GB of formatted capacity.
The industry continues to supply increased capacity per unit as users' system needs increase and
technological and manufacturing advances continue to make higher capacity drives more aÅordable. In the
mainstream desktop PC market, the Company believes that the rate of increase in storage capacity per unit
has recently outpaced the rate of increase in demand for such capacity. This will result in the Company
changing its product mix, with an increasing percentage of lower capacity hard drives manufactured with
fewer heads and disks per unit. The Company believes that even though units demanded will increase, this
changing product mix will reduce the average selling price per hard drive unit in the desktop PC market. In
contrast, the emerging use of hard drives to record and play back audio and video content in the audio-visual
market is expected to create demand for storage capacity that will exceed the growth in demand for increased
capacity in the desktop PC market. Overall, industry sources believe that the current rate of increase in storage
capacity per unit shipped will continue for the foreseeable future. Accordingly, the Company believes that
time-to-market, time-to-volume and time-to-quality leadership with higher capacity drives at attractive price
levels will continue to be critical to its future success in serving this market.
Users of desktop PCs, especially entry-level desktop PCs, have become increasingly price sensitive. In
1999 the market for desktop PC's priced below $1,000 grew signiÑcantly, and in 2000 the market for desktop
PC's priced below $800 was the fastest growing segment of the market. These systems typically do not contain
high performance hard drives, but the growth of these segments has placed downward price pressure on higher
cost systems as well, thereby contributing to the increasing price pressures on desktop hard drives. The
Company has development eÅorts underway to speciÑcally address the entry-level consumer PC market. See
Part II, Item 7, under the heading ""Risk factors related to the hard drive industry in which we operate.''
Products
The Company's WD Caviar@ and WD Protege‚ brand products are designed to serve the advanced and
value portions, respectively, of the desktop PC hard drive market, and its WD Performer‚ brand products are
designed to serve the emerging audio-visual portion of the hard drive market.
Desktop PC Products. The WD Caviar family currently consists of 1.0'' high, 3.5-inch form factor
products with capacities ranging from 7.5 GB to 45.0 GB and rotation speeds of 5400 and 7200 revolutions per
minutes (""rpm''). In 1998 the Company introduced the Data Lifeguard‚ feature, an exclusive data reliability
4