Western Digital 2011 Annual Report Download - page 29

sell, which would result in substantial harm to our operating results. Similarly, a fire, flood, earthquake, tsunami or other
disaster, condition or event such as political instability, civil unrest or a power outage that adversely affects any of these
facilities would significantly affect our ability to manufacture and/or sell hard drives, which would result in a substantial
loss of sales and revenue and a substantial harm to our operating results.
For example, while we presently do not have manufacturing operations located in Japan, we do source certain
components from suppliers with facilities in Japan. The March 2011 earthquakes, tsunami and related events in Japan,
including the resulting power outages, have affected and may continue to affect the supply of certain components used in
the production of hard drives and systems that include hard drives. The development of events in Japan has, however,
been fluid and unpredictable. If we experience any shortage of components of acceptable quality, or any interruption in
the supply of required components we cannot promptly obtain from alternative sources at acceptable prices, our operating
results would be adversely affected. In addition, even if the events in Japan do not adversely affect our component supply,
they may adversely affect the supply of other components our customers use in their systems, which could negatively
impact demand for our products and, therefore, our revenues.
Manufacturing outside the United States and marketing our products globally subjects us to numerous risks.
We are subject to risks associated with our global manufacturing operations and global marketing efforts,
including:
• obtaining requisite U.S. and foreign governmental permits and approvals;
• currency exchange rate fluctuations or restrictions;
• political instability and civil unrest;
• limited transportation availability, delays, and extended time required for shipping, which risks may be
compounded in periods of price declines;
• higher freight rates;
• labor problems;
• trade restrictions or higher tariffs;
• copyright levies or similar fees or taxes imposed in European and other countries;
• exchange, currency and tax controls and reallocations;
• increasing labor and overhead costs; and
• loss or non-renewal of favorable tax treatment under agreements or treaties with foreign tax authorities.
Terrorist attacks may adversely affect our business and operating results.
The continued threat of terrorist activity and other acts of war or hostility have created uncertainty in the financial
and insurance markets and have significantly increased the political, economic and social instability in some of the
geographic areas in which we operate. Additionally, it is uncertain what impact the reactions to such acts by various
governmental agencies and security regulators worldwide will have on shipping costs. Acts of terrorism, either
domestically or abroad, could create further uncertainties and instability. To the extent this results in disruption or
delays of our manufacturing capabilities or shipments of our products, our business, operating results and financial
condition could be adversely affected.
Sudden disruptions to the availability of freight lanes could have an impact on our operations.
We generally ship our products to our customers, and receive shipments from our suppliers, via air, ocean or land
freight. The sudden unavailability or disruption of cargo operations or freight lanes, such as due to labor difficulties or
disputes, severe weather patterns or other natural disasters, or political instability or civil unrest, could impact our
operating results by impairing our ability to timely and efficiently deliver our products.
23