Western Digital 2001 Annual Report Download - page 5

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Western Digital Corporation made tremendous progress in fiscal 2001. The entire organization has been
focused on ensuring that our infrastructure and business model are tuned to remain healthy during difficult times
and to deliver better returns to our shareholders in periods of stronger growth. We believe we are succeeding in
this effort.
Noteworthy during the year were significant changes in the infrastructure of the
hard drive industry. With growth in the PC industry slower than at any time since the
industry’s inception in the early 1980s, the hard drive business witnessed the privatization
of industry giant Seagate Technologies, the merger of Quantum’s hard drive business with
Maxtor and, more recently, the decision by Fujitsu to exit the desktop hard drive
business. These developments leave three leading desktop hard drive companies –
Western Digital, Seagate, and Maxtor – with approximately 75 percent of the worldwide
personal hard drive business, and provide an outstanding opportunity for more rational
industry dynamics in the years ahead.
Although the PC industry’s growth has been slowed by the worldwide cutback in
information technology spending, we are convinced of its viability as a high volume,
growing market, albeit at slower than earlier rates. Potential growth drivers for the EIDE
hard drive industry in the next year are plentiful, including the launch of Microsoft’s new
Windows® XP operating system, the eventual corporate desktop PC refresh cycle, less expensive microprocessor
chips that drive system performance, the increasing application of EIDE drives in entry-level servers, and the
reality of new consumer electronics products featuring hard drives. IDC
forecasts a compound annual unit growth rate of over 120 percent from
2000 to 2004 for hard drives shipped into these non-traditional
applications, with shipments exceeding 35 million in 2004.
Even though financial results in fiscal 2001 failed to satisfy our
longer-term goals for the company, Western Digital’s core hard drive
business made great strides. Unit volume grew 19 percent and revenues
eight percent as our market share climbed above 15 percent, a significant
improvement from our year-earlier share.
0
FY1999
2.8%
4.0%
Improvement in Desktop
GROSS MARGIN
10.8%
FY2000 FY2001
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Results exclude non-recurring items.
New product leadership, low cost designs and
consolidation of manufacturing facilities into one
world-class factory have brought Western Digital's
gross margin back to industry competitive levels.
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