Western Digital 2006 Annual Report Download - page 12

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Enterprise-class SATA drives are becoming commonplace for IT infrastructure applications such as databases,
scientific computing, web caching and electronic mail. These applications have become an important market for large
capacity SATA hard drives. We believe that this market will consume a growing portion of the highest capacity hard
drives in the next three years.
Consumer Electronics Market
The use of hard drives in CE products has been a major growth area in recent years. Today’s three largest segments of
this market are:
• digital video content in applications such as DVRs;
• audio and video content in applications such as consumer handheld devices, including MP3 players; and
• hard drives in game consoles.
Since 1999, DVRs have been available for use in home entertainment systems and they offer enhanced capabilities
such as pausing live television, simplifying the process of recording, cataloging recorded television programs and quickly
forwarding or returning to any section of a recorded television program. Additionally, digital video disk (“DVD”)
recorders increasingly incorporate hard drives to allow for DVR functionality and faster recording of content onto
removable DVDs. The market for these products favors large capacity hard drives and continues to grow in Japan, North
America, and Europe. Additionally, the rest of Asia Pacific shows strong interest in this market. We believe growth in
this market will continue to build demand for higher capacity hard drives.
Hard drives with 1.8-inch or 1.0-inch form factors primarily address the consumer handheld device and portable
external storage markets. The majority of hard drives used in portable media players that play both digital audio and
video content are 1.8-inch form factors.
External Hard Drive Market
Most new PC systems include high-speed external interfaces, such as FireWire
TM
, USB 2.0 or Ethernet network
connections that permit users to supplement the storage space of their PC systems or home and small office networks with
the use of external hard drives. Users store additional programs or multimedia content, and back up internal hard drives
with external hard drives. Although external hard drives are a small part of the overall hard drive market, we believe that
sales will continue to grow. External storage can often be the easiest, quickest or only way of adding additional storage
capacity to either a desktop or notebook computer. In addition, there is opportunity for external storage in CE products as
a way of expanding storage capacity in these devices.
Other Market Opportunities
We regularly review opportunities to apply our knowledge of data storage technology to markets that we do not
currently serve. Based on significant investments we made over the last four years, we believe we now have the technology
building blocks to increase our overall market penetration and be a full-line hard drive supplier. Consistent with our
measured and deliberate approach to new market entries in the recent past, our approach to additional new markets will
be based on a careful assessment of the risks, rewards, requirements and profit potential of such actions.
Products
We offer a broad line of hard drives designed for various markets. We market our hard drives under brand names
including WD Caviar», WD Raptor», WD Scorpio
TM
, WD Passport
TM
and My Book
TM
. These hard drives service the
desktop, mobile, enterprise, CE and branded products markets, and can be found in products including desktop
6