Western Digital 2002 Annual Report Download - page 32

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Rapidly changing market conditions in the hard drive industry make it diÇcult to estimate actual results.
We have made and continue to make a number of estimates and assumptions relating to our consolidated Ñnancial
reporting. The rapidly changing market conditions with which we deal means that actual results may diÅer signiÑcantly
from our estimates and assumptions. Key estimates and assumptions for us include:
‚ accruals for warranty costs related to product defects;
‚ price protection adjustments and other sales promotions and allowances on products sold to retailers, resellers and
distributors;
‚ inventory adjustments for write-down of inventories to lower of cost or market value (net realizable value);
‚ reserves for doubtful accounts;
‚ accruals for product returns;
‚ accruals for litigation and other contingencies; and
‚ reserves for deferred tax assets.
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;
and
‚ changes in Ñnancial estimates by securities analysts relating speciÑcally to us or the hard drive industry in general.
In addition, general economic conditions may cause the stock market to experience extreme price and volume
Öuctuations from time to time that particularly aÅect the stock prices of many high technology companies. These
Öuctuations often appear to be 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 should any new lawsuits be Ñled, such
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 the risks described herein, in the future we may be unable to maintain adequate Ñnancial resources for
capital expenditures, expansion or acquisition activity, working capital and research and development. We have a credit
facility, which matures on September 20, 2003. 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 ensure that additional Ñnancing will be available to us or available on acceptable
terms. An equity Ñnancing could also be dilutive to our existing stockholders.
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