Western Digital 2014 Annual Report Download - page 18

We believe that our sourcing strategy currently enables us to have the business flexibility needed to select the
highest quality, low cost of ownership suppliers as product designs and technologies evolve. We generally retain
multiple suppliers for each of our component requirements but in some instances use sole sources for business reasons.
Currently, we believe that there are no major issues with component availability. For a discussion of associated risks,
see Item 1A of this Annual Report on Form 10-K.
Sales and Distribution
We maintain sales offices in selected parts of the world including the major geographies of the Americas, Asia
Pacific, Europe and the Middle East. Our international sales, which include sales to foreign subsidiaries of United
States (“U.S.”) companies but do not include sales to U.S. subsidiaries of foreign companies, represented 80%, 78%
and 81% of our net revenue for 2014, 2013 and 2012, respectively. Sales to international customers are subject to
certain risks not normally encountered in domestic operations, including exposure to tariffs and various trade regu-
lations. For a discussion regarding associated risks, see Item 1A of this Annual Report on Form 10-K.
We perform our marketing and advertising functions internally and through outside firms utilizing both
consumer media and trade publications targeting various reseller and end-user categories. We also maintain customer
relationships through direct communication and providing information and support through our Web site. In accord-
ance with standard storage industry practice, we provide distributors and retailers with limited price protection and
programs under which we reimburse certain marketing expenditures. We also provide distributors, resellers and
OEMs with other sales incentive programs.
Original Equipment Manufacturers. OEMs, including large-scale datacenter operators,purchase our products,
either directly or through a contract manufacturer such as an original design manufacturer (“ODM”), and assemble
them into the devices they build. OEMs typically seek to qualify two or more providers for each generation of prod-
ucts and generally will purchase products from those vendors for the life of that product. Many of our OEM customers
utilize just-in-time inventory management processes. As a result, for certain OEMs we maintain a base stock of fin-
ished goods inventory in facilities located near or adjacent to the OEM’s operations. In addition, we also sell directly
to cloud infrastructure players, which we classify as OEMs for purposes of channel information.
Distributors. We use a broad group of distributors to sell our products to non-direct customers such as small
computer and CE manufacturers, dealers, systems integrators, online retailers and other resellers. Distributors gen-
erally enter into non-exclusive agreements with us for the purchase and redistribution of our products in specific terri-
tories.
Retailers. We sell our branded products directly to a select group of major retailers such as computer super-
stores, warehouse clubs, online retailers, and computer electronics stores, and authorize sales through distributors to
smaller retailers. The retail channel complements our other sales channels while helping to build brand awareness for
us and our products. We also sell our branded products through our Web sites.
For each of 2014 and 2012, sales to Hewlett Packard Company accounted for 11% of our net revenue. For 2013,
no single customer accounted for 10% or more of our net revenue. For a discussion of associated risks, refer to Item 1A
of this Annual Report on Form 10-K. For additional information regarding revenue recognition, sales by geographic
region and major customers, 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.
Backlog
A substantial portion of our orders are generally for shipments within 30 to 60 days of the placement of the
order. Customers’ purchase orders typically may be canceled with relatively short notice to us, with little or no cost to
the customer, or modified by customers to provide for delivery at a later date. In addition, for many of our OEMs uti-
lizing just-in-time inventory, we do not generally require firm order commitments and instead, receive a periodic
forecast of requirements. Therefore, backlog information as of the end of a particular period is not necessarily
indicative of future levels of our revenue and profit and may not be comparable to prior periods.
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