Western Digital 2003 Annual Report Download - page 3

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Results of operations in fiscal 2003 again proved the worth of Western
Digital’s approach to its business as our company reported another outstanding
year of growth and profitability. On 36 percent greater unit volume and a
revenue increase of 26 percent, Western Digital delivered nearly four times the
prior year’s operating income and nearly a threefold increase in net income.
Results were the best in five years and we continue to outperform a broad set of
other computing hardware companies across the information technology
industry.
The hard drive industry has been doing very well, notwithstanding a
prolonged slowdown in overall spending levels in information technology.
Industry observers estimate that the overall hard drive market will have grown
9.5 percent in calendar 2003 to over 227 million units. Hard drive industry
pricing has moderated over the past two years, and industry inventories have
been consistently managed within disciplined ranges – all signs of a more
mature and rational, albeit still intensely competitive, industry. Furthermore,
the focus of the remaining major independent players continues to demonstrate
an emphasis on sustained profitability, cash generation and creation of
shareholder value.
In this environment, Western Digital has thrived with thoughtful
implementation of industry-leading technology, superb execution of our
product and manufacturing plans, and a great customer base. Western Digital
has maintained its leadership position at the very high end of the desktop hard
drive market and begun addressing the near-line storage market with the fastest
and highest-capacity drive based on 80-gigabyte technology – a 7200 RPM,
250 gigabyte drive in both serial and parallel ATA interfaces. Our transition to
80 gigabyte-per-platter technology in our desktop products is effectively
complete. We have qualified this technology with all leading OEM customers
and we are shipping the technology to each of them.
With the introduction of our first Enterprise Serial ATA (ESATA) hard
drives in fiscal 2003, we were key participants in the development of an
industry infrastructure to support the migration of enterprise-class customers
from costly SCSI technology to the highly efficient and cost-effective Serial
ATA interface. This technology improves traditional EIDE performance and
data protection to the levels needed in mid-level server, workstation and the
newer near-store enterprise applications, heretofore the domain of the costlier
Fellow Shareholders
2003 was an outstanding year of growth
and profitability for our company
Matt Massengill
Chairman and Chief Executive Officer
Dollars in millions
FY2001
$2,151.2
FY2002 FY2003
$0.0
$1,000.0
$2,000.0
$3,000.0
REVENUE
$1,953.4
$2,718.5
Solid execution and record unit shipments
resulted in a 39% improvement in revenue over
the past two years.
Dollars in millions
$(50.0)
$0.0
$50.0
$100.0
$150.0
$200.0
FY2001
$(21.5)
$50.7
FY2002 FY2003
$186.8
OPERATING INCOME
Continuous focus on running a highly efficient
and flexible business that has consistently
produced high quality drives enabled Western
Digital to achieve operating income of over
$185 million in 2003.