Western Digital 2001 Annual Report Download - page 36

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We have only one manufacturing facility, which subjects us to the risk of damage or loss of the facility.
Our volume manufacturing operations currently are based in one facility in Malaysia. A Ñre, Öood,
earthquake or other disaster or condition aÅecting our facility or the geographic area in which it is located
would almost certainly result in a loss of substantial sales and revenue and harm our operating results.
Manufacturing our products abroad subjects us to numerous risks.
We are subject to risks associated with our foreign manufacturing operations, including:
‚ obtaining requisite United States and foreign governmental permits and approvals
‚ currency exchange rate Öuctuations or restrictions
‚ political instability and civil unrest
‚ transportation delays or higher freight rates
‚ labor problems
‚ trade restrictions or higher tariÅs
‚ exchange, currency and tax controls and reallocations
‚ loss or non-renewal of favorable tax treatment under agreements or treaties with foreign tax authorities.
We have attempted to manage the impact of foreign currency exchange rate changes by, among other
things, entering into short-term, forward exchange contracts. However, those contracts do not cover our full
exposure and can be canceled by the issuer if currency controls are put in place, as occurred in Malaysia
during the Ñrst quarter of 1999. As a result of the Malaysian currency controls, we are no longer hedging the
Malaysian currency risk.
Our plan to broaden our business takes us into new markets.
We are developing storage devices and content management software for the emerging broadband
television market through our Keen PM subsidiary. We will be facing the challenge of developing products for
a market that is still evolving and subject to rapid changes and shifting consumer preferences. There are
several competitors which have also entered this emerging market, and there is no assurance that the market
for digital storage devices for television and other audio-visual content will materialize or support all of these
competitors.
We have entered the data warehouse software and services market through our SageTree subsidiary and
are considering other initiatives related to data and content management, storage and communication. In any
of these initiatives we will be facing the challenge of developing products and services for markets that are still
evolving and which have many current and potential competitors. If we are not successful in these new
initiatives it will likely harm our operating results.
We have developed technologies and services for integrating high-quality digital video into everyday
computing through our Cameo subsidiary. We will be facing the challenge of developing products for a market
that is still evolving and subject to rapid changes and shifting consumer preferences. There is no assurance that
the market for these products will materialize or that the products we produce will be acceptable to that
market.
Our reliance on intellectual property and other proprietary information subjects us to the risk of signiÑcant
litigation.
The hard drive industry has been characterized by signiÑcant litigation. This includes litigation relating to
patent and other intellectual property rights, product liability claims and other types of litigation. We are
currently evaluating notices of alleged patent infringement or notices of patents from patent holders. We also
are a party to several judicial and other proceedings relating to patent and other intellectual property rights. If
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