Western Digital 2010 Annual Report Download - page 36

If we fail to identify, manage, complete and integrate acquisitions, investment opportunities or other significant transactions,
it may adversely affect our future results.
As part of our growth strategy, we may pursue acquisitions of, investment opportunities in or other significant
transactions with companies that are complementary to our business. In order to pursue this strategy successfully, we
must identify attractive acquisition or investment opportunities, successfully complete the transaction, some of which
may be large and complex, and manage post-closing issues such as integration of the acquired company or employees. We
may not be able to identify or complete appealing acquisition or investment opportunities given the intense competition
for these transactions. Even if we identify and complete suitable corporate transactions, we may not be able to successfully
address any integration challenges in a timely manner, or at all. If we fail to successfully integrate an acquisition, we may
not realize all or any of the anticipated benefits of the acquisition, and our future results of operations could be adversely
affected.
If we are unable to retain or hire key staff and skilled employees our business results may suffer.
Our success depends upon the continued contributions of our key staff and skilled employees, many of whom would
be extremely difficult to replace. Global competition for skilled employees in the data storage industry is intense and, as
we attempt to move to a position of technology leadership in the storage industry, our business success becomes
increasingly dependent on our ability to retain our key staff and skilled employees as well as attract, integrate and retain
new skilled employees. Volatility or lack of positive performance in our stock price and the overall markets may adversely
affect our ability to retain key staff or skilled employees who have received equity compensation. Additionally, because a
substantial portion of our key employees’ compensation is placed “at risk” and linked to the performance of our business,
when our operating results are negatively impacted by global economic conditions, we are at a competitive disadvantage
for retaining and hiring key staff and skilled employees versus other companies that pay a relatively higher fixed salary. If
we are unable to retain our existing key staff or skilled employees, or hire and integrate new key staff or skilled employees,
or if we fail to implement succession plans for our key staff, our operating results would likely be harmed.
The nature of our business and our reliance on intellectual property and other proprietary information subjects us to the risk of
significant litigation.
The data storage industry has been characterized by significant litigation. This includes litigation relating to patent
and other intellectual property rights, product liability claims and other types of litigation. Litigation can be expensive,
lengthy and disruptive to normal business operations. Moreover, the results of litigation are inherently uncertain and may
result in adverse rulings or decisions. We may enter into settlements or be subject to judgments that may, individually or
in the aggregate, have a material adverse effect on our business, financial condition or operating results.
We evaluate notices of alleged patent infringement and notices of patents from patent holders that we receive from
time to time. If claims or actions are asserted against us, we may be required to obtain a license or cross-license, modify
our existing technology or design a new non-infringing technology. Such licenses or design modifications can be
extremely costly. In addition, we may decide to settle a claim or action against us, which settlement could be costly. We
may also be liable for any past infringement. If there is an adverse ruling against us in an infringement lawsuit, an
injunction could be issued barring production or sale of any infringing product. It could also result in a damage award
equal to a reasonable royalty or lost profits or, if there is a finding of willful infringement, treble damages. Any of these
results would increase our costs and harm our operating results.
Our reliance on intellectual property and other proprietary information subjects us to the risk that these key ingredients of our
business could be copied by competitors.
Our success depends, in significant part, on the proprietary nature of our technology, including non-patentable
intellectual property such as our process technology. If a competitor is able to reproduce or otherwise capitalize on our
technology despite the safeguards we have in place, it may be difficult, expensive or impossible for us to obtain necessary
legal protection. Also, the laws of some foreign countries may not protect our intellectual property to the same extent as
do U.S. laws. In addition to patent protection of intellectual property rights, we consider elements of our product designs
and processes to be proprietary and confidential. We rely upon employee, consultant and vendor non-disclosure
agreements and contractual provisions and a system of internal safeguards to protect our proprietary information.
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