Western Digital 2004 Annual Report Download - page 36

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Inaccurate projections of demand for our product can cause large Öuctuations in our quarterly results.
We often ship a high percentage (at times in excess of 50%) of our total quarterly sales in the third month of the
quarter, which makes it diÇcult for us to forecast our Ñnancial results prior to the end of the quarter. In addition, our
quarterly projections and results may be subject to signiÑcant Öuctuations as a result of a number of other factors
including:
‚ the timing of orders from and shipment of products to major customers;
‚ our product mix;
‚ changes in the prices of our products;
‚ manufacturing delays or interruptions;
‚ acceptance by customers of competing products in lieu of our products;
‚ variations in the cost of components for our products;
‚ limited access to components that we obtain from a single or a limited number of suppliers, such as Komag,
IBM, Marvell, ALPS Electric Co., Ltd., STMicroelectronics, and SAE Magnetics Ltd., a subsidiary of TDK
Corporation;
‚ competition and consolidation in the data storage industry;
‚ seasonal and other Öuctuations in demand for PCs often due to technological advances; and
‚ availability and rates of transportation.
Rapidly changing market conditions in the hard disk 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;
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