Western Digital 2008 Annual Report Download - page 35

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;
• growth rates that are lower than our previous high growth-rate periods;
• changes in financial estimates by securities analysts relating specifically to us or the hard drive industry in
general; and
• macroeconomic conditions that affect the market generally.
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.
Negative conditions in the global credit markets may impair the liquidity of a portion of our investment portfolio.
Our long-term investments consist of auction-rate securities totaling $28 million as of June 27, 2008. The recent
negative conditions in the global credit markets have prevented some investors from liquidating their holdings of
auction-rate securities because the amount of securities submitted for sale has exceeded the amount of purchase orders for
such securities. If the credit market does not improve, auctions for our invested amounts may fail. If an auction fails for
securities in which we have invested, we may be unable to liquidate some or all of our auction-rate securities at par, should
we need or desire to access the funds invested in those securities. In the event we need or desire to access these funds, we
will not be able to do so until a future auction on these investments is successful or a buyer is found outside the auction
process. If a buyer is found but is unwilling to purchase the investments at par, we may incur a loss. For example, during
the year ended June 27, 2008, the market values of some of the auction-rate securities we owned were impacted by the
macro-economic credit market conditions and as a result, we recognized $10 million of other-than-temporary losses to
mark the remaining investments to estimated market value. Further, rating downgrades of the security issuer or the
third-parties insuring such investments may require us to adjust the carrying value of these investments through an
additional impairment charge.
If our internal controls are found to be ineffective, our financial results or our stock price may be adversely affected.
Our most recent evaluation resulted in our conclusion that as of June 27, 2008, in compliance with Section 404 of
the Sarbanes-Oxley Act of 2002, our internal control over financial reporting was effective. We believe that we currently
have adequate internal control procedures in place for future periods; however, if our internal control over financial
reporting is found to be ineffective, investors may lose confidence in the reliability of our financial statements, which may
adversely affect our financial results or our stock price.
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