Western Digital 2014 Annual Report Download - page 10

Download and view the complete annual report

Please find page 10 of the 2014 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 124

  • 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
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

PART I
Item 1. Business
General
We are a leading developer, manufacturer and provider of data storage solutions that enable consumers, busi-
nesses, governments and other organizations to create, manage, experience and preserve digital content. Our product
portfolio includes hard disk drives (“HDDs”) and solid-state drives (“SSDs”). HDDs are our principal products and are
today’s primary storage medium for digital content, with the use of solid-state storage products growing rapidly. Our
products are marketed under the HGST, WD and G-Technology brand names. Over the last 10 years, we have ach-
ieved strong financial results, including consistently strong cash flow generation.
We believe we are well positioned to capitalize on important long-term growth trends in the rapidly changing
storage industry — the ongoing expansion in digital content and the growth in the amount of that content being
stored. These trends are linked directly to consumers’ and commercial enterprises’ increasingly ubiquitous experience
with data and the increasing value of that data. The confluence of data growth and the ability to expand the extraction
of value from data is driving the need for the long-term retention of as much data as possible for legal and regulatory
purposes and for potential future refinements in a wide range of fields. We believe the ways in which people and
organizations are creating and using data are changing and that the amount of data considered useful to store is
expanding. We also believe we are strongly positioned to play a role in the continuation of these trends as an enabler
of the creation and storage of additional data. With a focus on innovation and value creation, our goal is to grow
through continued strong execution and with targeted investments in datacenter infrastructure, mobility and the
cloud.
Due to regulatory requirements, we operate our global business through two independent subsidiaries — HGST
and WD, both long-time innovators in the storage industry. In March 2014, we submitted an application to the
Ministry of Commerce of the People’s Republic of China (“MOFCOM”) to lift the condition it imposed on our Com-
pany to operate these businesses separately. At this time, we are awaiting MOFCOM’s response to our application.
Our headquarters are located in Irvine, California. WDC was founded in 1970 as a specialized semiconductor
manufacturer and since entering the hard drive industry in 1988, its WD subsidiary has been a technology standard-
setter in the industry’s highest volume markets. HGST, a provider of high-value storage in enterprise markets, was
acquired by WDC in March 2012. HGST was founded in 2003 through the combination of the HDD businesses of
International Business Machines Corporation, the inventor of the HDD, and Hitachi, Ltd. (“Hitachi”). As of June 27,
2014, WDC had approximately 9,400 engineers and one of the industry’s largest patent portfolios with more than
7,000 active patents worldwide.
HGST and WD have relationships with the full range of customers currently addressing storage opportunities.
These include storage subsystem suppliers, major server original equipment manufacturers (“OEMs”), Internet and
social media infrastructure players, and personal computer (“PC”) and Mac™ OEMs. Through HGST and WD, we
sell our products to OEMs, distributors, resellers, cloud infrastructure players, and consumers. We have a strong con-
sumer brand heritage with our WD and G-Technology branded products businesses.
The storage market in which we operate is rapidly changing and evolving. To address these dynamics, we regu-
larly review opportunities to apply our knowledge of data storage technology to markets that we do not currently
serve or in markets where we seek to broaden our participation and augment our resources and capabilities. We have
taken actions to strengthen our enterprise SSD business with the acquisitions of sTec, Inc. (“sTec”), VeloBit, Inc.
(“VeloBit”) and Virident Systems, Inc. (“Virident”), and our strategic investments in Skyera, Inc., a provider of enter-
prise solid-state storage systems, Tegile Systems, Inc., a provider of hybrid storage arrays, and Avere Systems, a
supplier of enterprise storage for the hybrid cloud. In making these investments, we seek to develop strategic relation-
ships with technology innovators in the broader storage market to enable our customers to develop highly optimized
storage solutions that meet their changing data management needs. We believe we have the technology building
blocks to increase our overall market participation and be a full-line data storage solutions supplier. Consistent with
our measured and deliberate approach to new market entries in the past, our approach to additional new markets will
be based on a careful assessment of the risks, rewards, requirements and profit potential of such actions.
4