Western Digital 2005 Annual Report Download - page 41

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difficulties in transitioning to the new software, including difficulties related to the failure or inefficient operation of the
new software. Such difficulties or failures could result in our inability to access business and financial information stored
on the system or the loss of such information. Any inability to access, or loss of, such information as a result of the
transition or otherwise could affect our daily operations, including our ability to ship products and invoice our customers,
which could have a significant adverse impact on our business, financial condition and results of operations.
Inaccurate projections of demand for our product can cause large fluctuations in our quarterly results.
We often ship a high percentage of our total quarterly sales in the third month of the quarter, which makes it
difficult for us to forecast our financial results prior to the end of the quarter. In addition, our quarterly projections and
results may be subject to significant fluctuations 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 availability of components that we obtain from a single or a limited number of suppliers;
‚ competition and consolidation in the data storage industry;
‚ seasonal and other fluctuations 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 difficult to estimate actual results.
We have made and continue to make a number of estimates and assumptions relating to our consolidated financial
reporting. The rapidly changing market conditions with which we deal means that actual results may differ significantly
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 significantly affect the market price of our common stock:
‚ actual or anticipated fluctuations in our operating results;
‚ announcements of technological innovations by us or our competitors which may decrease the volume and
profitability of sales of our existing products and increase the risk of inventory obsolescence;
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