Western Digital 2006 Annual Report Download - page 32

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• 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;
• new products introduced by us or our competitors;
• periods of severe pricing pressures due to oversupply or price erosion resulting from competitive pressures or
industry consolidation;
• developments with respect to patents or proprietary rights;
• conditions and trends in the hard drive, computer, data and content management, storage and communication
industries; and
• changes in financial estimates by securities analysts relating specifically to us or the hard drive industry in
general.
In addition, general economic conditions may cause the stock market to experience extreme price and volume
fluctuations from time to time that particularly affect the stock prices of many high technology companies. These
fluctuations often appear to be unrelated to the operating performance of the companies.
Securities class action lawsuits are often brought against companies after periods of volatility in the market price of
their securities. A number of such suits have been filed against us in the past, and should any new lawsuits be filed, such
matters could result in substantial costs and a diversion of resources and management’s attention.
We may be unable to raise future capital through debt or equity financing.
Due to the risks described herein, in the future we may be unable to maintain adequate financial resources for capital
expenditures, expansion or acquisition activity, working capital and research and development. We have a credit facility
which matures on September 20, 2009. If we decide to increase or accelerate our capital expenditures or research and
development efforts, or if results of operations do not meet our expectations, we could require additional debt or equity
financing. However, we cannot ensure that additional financing will be available to us or available on acceptable terms.
An equity financing could also be dilutive to our existing stockholders.
If our internal controls are found to be ineffective, our financial results or our stock price may be adversely affected.
Our evaluation resulted in our conclusion that as of June 30, 2006, in compliance with Section 404 of the Sarbanes-
Oxley Act of 2002, our internal controls over financial reporting were effective. We believe that we currently have
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