Western Digital 2005 Annual Report Download - page 11

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consumer devices offer the end-user enhanced features such as pausing live television, simplifying the process of recording
and cataloging recorded television programs and quickly forwarding or returning to any section of a recorded television
program. In addition, hard disk drives are being increasingly incorporated into DVD recorders to allow for PVR/DVR
functionality and faster recording of content onto removable DVDs. In general, the market for these products favor large
capacity hard disk drives, and there is a growing market for these products in Japan and North America, and strong
interest in Europe and the rest of Asia Pacific. The Company believes that growth in this market may increase the
demand for higher capacity hard disk drives.
The Company has plans to enter the 1.0-inch hard disk drive market in the future, and anticipates offering 1.0-inch
hard disk drives for use in CE products to store and play audio content. In addition, the Company believes that there may
be opportunities for growth in sales of 1.0-inch hard disk drives for use in future versions of cameras and cell phones. The
strong growth in demand for hard disk drive storage in CE products to store and play audio content increased
significantly in the third calendar quarter of 2004. The Company believes based on industry data that a total over
2 million hard disk drive based MP3 players were sold in the market for the third calendar quarter of 2004. The majority
of hard disk drives used in MP3 players are either 1.0-inch or 1.8-inch products. Sales of hard disk drive based MP3
players featuring 1.0-inch or 1.8-inch products continued with strong growth into calendar 2005.
For further discussion of the audio-video market, see Part II, Item 7, under the heading ""Risk Factors That May
Affect Future Results.''
Hard disk drives continue to be used in game consoles, although game console sales have fallen over the last four
years. Although the Company has provided hard disk drives for game consoles in the past, the overall market growth for
hard disk drives in game consoles continues to be challenged.
For an additional discussion of the video game market, see Part II, Item 7, under the heading ""Risk Factors That
May Affect Future Results.''
The External Hard Disk Drive Market.
Most new desktop PC systems are equipped with high-speed external interfaces, such as 1394/FireWire/i.Link,
USB or Ethernet. As a result, end users are able to supplement the storage space of their PC systems with the use of
external hard disk drive products that connect via these high-speed interfaces. External hard disk drive products are
commonly used for storing additional programs or multimedia content, or for backing up internal hard disk drives.
While the external hard disk drive market continues to be a small part of the overall hard disk drive market, the
Company believes that sales of external hard disk drives will continue to grow. In general, external storage may often be
the easiest, quickest or only way of adding additional storage capacity to either a notebook or desktop computer. In
addition, the Company believes that in the future there is opportunity for acceptance of external storage in CE products as
a way or expanding storage in these devices.
Other Market Opportunities.
The Company continuously evaluates opportunities to apply its knowledge of data storage technology beyond
current markets for hard disk drives. New business opportunities are evaluated for their direct impact on the Company's
ability to increase the sale of hard disk drives. The Company monitors the development of new markets related to data or
content storage and may, from time to time, offer new products or services to address appropriate new form factors,
interfaces or markets. Conversely, depending on the development of such markets and the Company's ability to achieve
its goals, the Company may, from time to time, withdraw from certain markets.
Products
The Company offers a broad line of hard disk drives designed for various markets. Western Digital's hard disk
drives are marketed under the WD Caviar», WD Raptor» and WD Scorpio
TM
brand names. These hard disk drives
service the desktop, enterprise, external hard disk drive and consumer electronics markets, and can be found in products
including but not limited to advanced performance desktop and workstations, gaming consoles, video surveillance
equipment, networking products, enterprise storage and notebook computers.
Consumer Electronics Products. The Company offers design capabilities and hard disk drive technologies for
consumer applications. The Company currently offers hard disk drive products designed for use in digital video recording
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