Western Digital 2011 Annual Report Download - page 20

expected, and our ability to compete, our revenue and gross margins and our results of operations may be adversely
affected.
The integration of HGST may result in significant restructuring charges that could adversely affect the financial results of
the combined company.
The financial results of the combined company may be adversely affected by cash expenses and non-cash accounting
charges incurred in connection with the combination. The amount and timing of these possible charges are not yet
known. The price of our common stock following the acquisition could decline to the extent the combined company’s
financial results are materially affected by these charges.
The financing of our planned HGST acquisition will dilute our stockholders’ ownership interest in the company, and may
have an adverse impact on our liquidity, limit our flexibility in responding to other business opportunities and increase our
vulnerability to adverse economic and industry conditions.
Our planned acquisition of HGST will be financed by a combination of the issuance of additional shares of our
common stock, the use of a significant amount of our cash on hand and the incurrence of a significant amount of
indebtedness. The issuance of additional shares of our common stock will dilute your ownership interest in the company.
The use of cash on hand and indebtedness to finance the acquisition will reduce our liquidity and could cause us to place
more reliance on cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of
our cash flow for operations and development activities. The credit agreement we expect to enter into with respect to the
indebtedness we will incur to finance the planned acquisition contains restrictive covenants, including financial
covenants requiring us to maintain specified financial ratios. Our ability to meet these restrictive covenants can be
affected by events beyond our control. The indebtedness and these restrictive covenants will also have the effect, among
other things, of impairing our ability to obtain additional financing, if needed, limiting our flexibility in the conduct of
our business and making us more vulnerable to economic downturns and adverse competitive and industry conditions. In
addition, a breach of the restrictive covenants could result in an event of default under the credit agreement we will enter
into with respect to the indebtedness, which, if not cured or waived, could result in the indebtedness becoming
immediately due and payable and could have a material adverse effect on our business, financial condition or operating
results.
Adverse global economic conditions and credit market uncertainty could harm our business, results of operations and financial
condition.
Adverse global economic conditions and uncertain conditions in the credit market have had, and in the future could
have, a significant adverse effect on our company and on the storage industry as a whole. Some of the risks and
uncertainties we face as a result of these global economic and credit market conditions include the following:
•Volatile Demand. Negative or uncertain global economic conditions could cause many of our direct and indirect
customers to delay or reduce their purchases of our products and systems containing our products. In addition,
many of our customers rely on credit financing to purchase our products. If negative conditions in the global
credit markets prevent our customers’ access to credit, product orders may decrease, which could result in lower
revenue. Likewise, if our suppliers, sub-suppliers and sub-contractors (collectively referred to as “suppliers”) face
challenges in obtaining credit, in selling their products or otherwise in operating their businesses, they may be
unable to offer the materials we use to manufacture our products. These actions could result in reductions in our
revenue and increased operating costs, which could adversely affect our business, results of operations and
financial condition.
•Restructuring Activities. If demand slows significantly as a result of a deterioration in economic conditions or
otherwise, we may need to execute restructuring activities to realign our cost structure with softening demand.
The occurrence of restructuring activities could result in impairment charges and other expenses, which could
adversely impact our results of operations or financial condition.
•Credit Volatility and Loss of Receivables. We extend credit and payment terms to some of our customers. In
addition to ongoing credit evaluations of our customers’ financial condition, we traditionally seek to mitigate our
credit risk by purchasing credit insurance on certain of our accounts receivable balances. As a result of the
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