Western Digital 2005 Annual Report Download - page 3

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Letter to our
Shareholders
Western Digital had an outstanding year in fiscal 2005. Revenues,
operating income, cash flow and earnings per share grew strongly;
our financial condition improved; and our development efforts
yielded new opportunities in fast-growing markets.
The global market for personal computers – the industry’s
highest volume market – continued its steady growth, and
other applications for rotating magnetic storage opened numerous
opportunities for even more rapid growth. Geographic
diversification also played a part in WD’s strong results as revenues
climbed in high-growth international markets such as those of
Asia, which now accounts for nearly a third of our revenue.
We continued to focus on cash and asset management, resulting in
cash flow from operations of $461 million – well over twice that
of the previous year. As a result, WD’s balance sheet improved,
with year-end cash and short-term investments of $598 million
and shareholders’ equity reaching a record $702 million.
The company’s better financial results were accompanied by
substantially greater investments in research and development. The
products that resulted from this effort now give WD the ability to
serve more than 80 percent of the total available market for hard
drives, up from 60 percent just a year ago. We will be addressing
90 percent of the world’s hard drive markets when our new, one-
inch drives begin shipping.
In last year’s report, I outlined our near-term aims: maintaining
steady, profitable growth in desktop hard drives by further
leveraging our leadership position in the industry’s highest-volume
market; building our market position in hard drives for enterprise-
class applications, personal video recorders, and other consumer
entertainment products; making a measured, rational entry into
the mobile personal computer hard drive market; and extending
our design and manufacturing expertise into even smaller form
factor drives for application in consumer electronics devices.
Matt Massengill
Chairman and Chief Executive Officer
Dollars in millions
$0
$1,000
$2,000
$3,000
$4,000
REVENUE
FY2004
$3,047
FY2005
$3,639
FY2003
$2,719
FY2001
$1,953
FY2002
$2,151
Strong demand in personal computer
and consumer markets resulted in a
34% improvement in revenue over
the past two years.
($50)
$0
$50
$100
$150
$200
OPERATING INCOME
FY2002
$51
FY2001
($22)
FY2004
$155
Dollars in millions
FY2003
$187
FY2005
$197
The sustained success of the WD business
model enabled the company to achieve
operating income of $197 million in 2005.