Western Digital 2005 Annual Report Download - page 32

Our operating results depend on optimizing time-to-market and time-to-volume, overall quality, and costs of new and
established products.
To achieve consistent success with our customers who manufacturer computers, systems and consumer electronic
products, we must balance several key attributes such as time-to-market, time-to-volume, quality, cost, service, price and
a broad product portfolio. If we fail to:
‚ maintain overall quality of products on new and established programs,
‚ maintain competitive cost structures on new and established products,
‚ produce sufficient quantities of products at the capacities our customers demand while managing the integration
of new and established technologies,
‚ develop and qualify new products that have changes in overall specifications or features that our customers may
require for their business needs,
‚ obtain commitments from our customers to qualify new products, redesigns of current products, or new
components in our existing products,
‚ qualify these products with key customers on a timely basis by meeting all of our customers' needs for
performance, quality and features,
‚ maintain an adequate supply of components required to manufacture our products,
‚ maintain the manufacturing capability to quickly change our product mix between different capacities, form
factors and spin speeds in response to changes in customers' product demands, or
‚ consistently meet stated quality requirements on delivered products,
our operating results could be adversely affected.
Product life cycles influence our financial results.
Product life cycles have been extending since the middle of calendar year 2002 due in large part to a decrease in the
rate of hard disk drive areal density growth. However, there can be no assurance that this trend will continue. If longer
product life cycles continue, we may need to develop new technologies or programs to reduce our costs on any particular
product in order to maintain competitive pricing for such product. This may result in an increase in our overall expenses
and a decrease in our gross margins, both of which could adversely affect our operating results. If product life cycles
shorten, it may be more difficult to recover the cost of product development before the product becomes obsolete. Our
failure to recover the cost of product development in the future could adversely affect our operating results.
Product life cycles in the desktop hard disk drive market require continuous technical innovation associated with higher
areal densities.
New products in the desktop hard disk drive market may require higher areal densities than previous product
generations, posing formidable technical and manufacturing challenges. Higher areal densities require existing head
technology to be improved or new technology developed to accommodate more data on a single disk. In addition, our
introduction of new products during a technology transition increases the likelihood of unexpected quality concerns. Our
failure to bring high quality new products to market on time and at acceptable costs may put us at a competitive
disadvantage to companies that achieve these results. In addition, technology improvements may require us to reduce the
price on existing products to remain competitive.
The difficulty of introducing hard disk drives with higher levels of areal density and the challenges of reducing other
costs may impact our ability to achieve historical levels of cost reduction.
Storage capacity of the hard disk drive, as manufactured by us, is determined by the number of disks and each
disk's areal density. Areal density is a measure of the amount of magnetic bits that can be stored on the recording surface
of the disk. Generally, the higher the areal density, the more information can be stored on a single platter. Historically,
we have been able to achieve a large percentage of cost reduction through increases in areal density. Increases in areal
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