Western Digital 2011 Annual Report Download - page 15

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For 2011 and 2010, no single customer accounted for 10% or more of our net revenue. For 2009, sales to Dell Inc.
accounted for 10% of our net revenue. For a discussion of risks related to our customers, refer to Item 1A of this Annual
Report on Form 10-K. For additional information regarding revenue recognition, sales by geographic region and major
customer information, see Part II, Item 8, Notes 1 and 6 in the Notes to Consolidated Financial Statements, included in
this Annual Report on Form 10-K.
Competition
We compete with manufacturers of hard drives for client compute, client non-compute and enterprise applications
as well as manufacturers of solid-state drives. Our competitors include companies such as Hitachi Global Storage
Technologies, Intel Corporation, Micron Technology, Inc., Samsung Electronics Co. Ltd., Seagate Technology, STEC, Inc.
and Toshiba Corporation.
The storage industry is intensely competitive with hard drive and solid-state suppliers competing for sales to a
limited number of major customers. Hard drives are highly substitutable due to the industry mandate of technical form,
fit and function standards and we believe there are no substantial barriers for existing competitors to offer competing
products. Hard drive manufacturers compete on the basis of product quality and reliability, storage capacity, unit price,
product performance, production volume capabilities, delivery capability, leadership in time-to-market, time-to-volume
and time-to-quality, service and support and ease of doing business. The relative importance of these factors varies by
customer and market and we believe that we are generally competitive in all of these factors. Semiconductor media
competes with hard drives along a range of product attributes. In particular, semiconductor media currently offers
attractive functionality in consumer handheld applications requiring smaller form factors, lower power and less storage
capacity, such as smartphones and tablets. Semiconductor media offers greater performance than hard drives in some
storage applications. Advances in magnetic, optical or other data storage technologies could also result in competitive
products for storing digital content with better performance or lower cost per unit of capacity than our products. We
monitor the advantages, disadvantages and advances of the full array of storage technologies on an ongoing basis.
We differentiate WD by focusing on operational excellence, high product quality and reliability, and designing and
incorporating into our storage devices desirable product performance attributes. We also differentiate WD by empha-
sizing non-product related attributes such as availability and rapid response to our customers, which requires accelerated
design cycles, customer delivery, production flexibility and timely service and support. We believe that trust in a
manufacturer’s reputation, its execution track record and the establishment of strategic relationships have become
important factors in the selection of a storage device, particularly in a rapidly changing technology environment.
Seasonality
We have historically experienced seasonal fluctuations in our business with higher levels of demand in the first and second
quarters of our fiscal year. This seasonality is a result of consumer spending at the beginning of the school year and during the
holiday season. Seasonality can also be impacted by the growth in emerging markets and macroeconomic conditions. For a
discussion of risks related to seasonality in our business, see Item 1A of this Annual Report on Form 10-K.
Service and Warranty
We generally warrant our newly manufactured products against defects in materials and workmanship from one to
five years from the date of manufacture depending on the type of product. Our warranty obligation is generally limited to
repair or replacement. We have engaged third parties in various countries in multiple regions to provide various levels of
testing, processing and/or recertification of returned products for our customers. For a further discussion of our service
and warranty policy, see Part II, Item 8, Note 1 of the Notes to Condensed Consolidated Financial Statements included in
this Annual Report on Form 10-K.
Manufacturing
We believe that we have significant know-how, unique product manufacturing processes, test and tooling,
execution skills and human resources to continue to be successful and be able to grow, as necessary, our manufacturing
operations. We strive to maintain manufacturing flexibility, high manufacturing yields, reliable products, and high-
quality components. The critical elements of our hard drive production are high volume and utilization, low cost
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