Western Digital 2014 Annual Report Download - page 24

capabilities as PCs, they have displaced or materially affected, and may continue to displace or materially
affect, the demand for PCs. If we are not successful in adapting our product offerings to include disk drives or
alternative storage solutions that address these devices, demand for our products in these markets may decrease
and our financial results could be materially adversely affected.
‰Cloud Computing. Consumers traditionally have stored their data on their PC, often supplemented with
personal external storage devices. Most businesses also include similar local storage as a primary or secondary
storage location. This storage is typically provided by hard disk drives. Over the last few years, cloud comput-
ing has emerged whereby applications and data are hosted, accessed and processed through a third-party pro-
vider over a broadband Internet connection, potentially reducing or eliminating the need for, among other
things, significant storage inside the accessing computer. If we are not successful in manufacturing compelling
products to address the cloud computing opportunity, demand for our products in these markets may decrease
and our financial results could be materially adversely affected.
‰Obsolete Inventory. In some cases, products we manufacture for these other markets are uniquely configured for
a single customer’s application, creating a risk of obsolete inventory if anticipated demand is not actually real-
ized.
‰Macroeconomic Conditions. Consumer spending has been, and may continue to be, adversely affected in many
regions due to negative macroeconomic conditions and high unemployment levels. Please see the risk factor
entitled “Adverse global economic conditions and credit market uncertainty could harm our business, results of operations
and financial condition.” for more risks and uncertainties relating to macroeconomic conditions.
In addition, demand in these other markets also could be negatively impacted by developments in the regulation
and enforcement of digital rights management and the emergence of new technologies, such as data deduplication,
compression and storage virtualization. If we are not able to respond appropriately, these factors could lead to our
customers’ storage needs being satisfied at lower prices with lower capacity hard drives or solid-state storage products,
thereby decreasing our revenue or putting us at a disadvantage to competing storage technologies. As a result, even
with increasing aggregate demand for digital storage, if we fail to anticipate or timely respond to these developments
in the demand for storage, our ASPs could decline, which could adversely affect our operating results. Furthermore,
our ability to accurately read and respond to market trends, such as trends relating to the Internet or big data, could
harm our results.
If we fail to respond to changes in the client compute market (the “PC market”), our operating results could suffer.
While sales to the other markets are becoming a more significant source of revenue, sales to the PC market
remain an important part of our business. The PC market, however, has been, and may continue to be, adversely
affected by the growth of tablet computers, smart phones and similar devices that perform many of the same capa-
bilities as PCs, the lengthening of product life cycles and macroeconomic conditions. If we fail to respond to changes
in the PC market, our operating results could suffer. Additionally, if demand in the PC market is worse than expected
as a result of these or other conditions, demand for our products in the PC market may decrease at a faster rate and our
operating results may be adversely affected.
Selling to the retail market is an important part of our business, and if we fail to maintain and grow our market share or gain
market acceptance of our branded products, our operating results could suffer.
Selling branded products is an important part of our business, and as our branded products revenue increases as a
portion of our overall revenue, our success in the retail market becomes increasingly important to our operating
results. Our success in the retail market depends in large part on our ability to maintain our brand image and corpo-
rate reputation and to expand into and gain market acceptance of our products in multiple channels, including tradi-
tional retail, e-commerce and online channels. Adverse publicity, whether or not justified, or allegations of product or
service quality issues, even if false or unfounded, could tarnish our reputation and cause our customers to choose prod-
ucts offered by our competitors. In addition, the proliferation of new methods of mass communication facilitated by
the Internet makes it easier for false or unfounded allegations to adversely affect our brand image and reputation. If
customers no longer maintain a preference for WD®, HGST™ or G-Technology™ brand products, our operating
results may be adversely affected.
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