Western Digital 2009 Annual Report Download - page 11

Download and view the complete annual report

Please find page 11 of the 2009 Western Digital annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

Industry
We design, develop and manufacture hard drives for the desktop and mobile PC, enterprise, CE and branded
product retail markets. We believe that growth in the sales of hard drives has continued to outpace the growth in the sales
of all PCs as there were approximately 84% more hard drives sold in the market than PCs in calendar 2008, based on
industry data. We believe the following factors continue to drive this accelerating growth of hard drive sales in addition
to PC applications:
• consumer use of hard drives for the playing, retention and creation of digital content for personal use in the
rapidly growing CE market;
• growth of the external hard drive or branded products market, permitting the easy storage, portability and
backup of digital data such as music, photographs or video;
• increased use of multiple hard drives in PCs for data backup and expanded storage capacity; and
• increased use of multiple cost-optimized high performance hard drives in data-intensive applications such as
Internet search engines and in hard drive intensive hosts for handheld computing devices.
Additionally, we believe that the demand for 2.5-inch hard drives has grown from approximately 16% of the overall
hard drive market in calendar 2003 to 41% of the overall hard drive market in calendar 2008, driven by the fast-growing
markets for notebook and netbook computers, game consoles and external storage.
We design, develop and manufacture solid-state drives for the embedded systems market which includes network-
communications, industrial, embedded-computing, medical, military, aerospace, media appliance and data streaming
applications. We believe that the growth rate of solid-state drives will be significant over the next four years, with
particular opportunities for growth in the enterprise storage, netbooks, and embedded systems markets.
We also design, develop and manufacture WD»-branded media players for the retail market. We believe there is a
growing need for consumers to play their stored digital content on their television or home theater system in connection
with the growing trend in the digitization of rich content and data.
These factors and our product expansion strategy have gradually increased our percentage of revenue derived from
non-desktop sources. In 2009, 62% of our revenue was from non-desktop sources compared to 56% in 2008.
For an additional discussion of risks relating to the hard drive industry, please see Item 1A of this Annual Report on
Form 10-K.
Desktop PC Market
The desktop PC market consists of the overall hard drive market for desktop computers. Individuals use desktop
computers in homes, businesses and multi-user networks. Desktop computers use software applications for word
processing, spreadsheet, desktop publishing, database management, multimedia, entertainment and for other needs.
Hard drives store desktop computer operating system and application software, as well as the data used by the
applications.
We believe that the demand for hard drives in the desktop PC market has grown in part due to:
• the overall growth of desktop computer sales;
• the increasing needs of businesses and individuals for increased storage capacity on their desktop computers;
• the continuing development of software applications to manage multimedia content; and
• the increasing use of broadband Internet, including content downloaded from the Internet onto desktop
computer hard drives.
We believe several other factors affect the rate of desktop computer unit growth, including growth of notebook and
netbook computers, maturing desktop PC markets in North America and Western Europe, an increase in first-time
buyers of desktop computers in Asia, Eastern Europe and Latin America, and the lengthening of desktop computer
replacement cycles.
5