Western Digital 2014 Annual Report Download - page 46

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The following table sets forth, for the periods presented, summary information regarding unit shipments, ASPs
and revenues by geography and channel (in millions, except percentages and ASPs):
Years Ended
June 27,
2014
June 28,
2013
June 29,
2012
Net revenue ...................................... $15,130 $15,351 $12,478
ASPs (per unit)* .................................. $ 58 $ 61 $ 62
Revenues by Geography (%)
Americas .................................... 25% 26% 23%
Europe, Middle East and Africa ................... 21 20 19
Asia ........................................ 54 54 58
Revenues by Channel (%)
Original Equipment Manufacturers (“OEM”) ......... 63% 63% 63%
Distributors .................................. 24 24 25
Retailers .................................... 13 13 12
Unit Shipments*
Compute .................................... 157 162 150
Non-compute ................................ 92 80 52
Total units shipped ................................ 249 242 202
* Based on sales of hard drive units only.
Fiscal Year 2014 Compared to Fiscal Year 2013
Net Revenue. Net revenue was $15.1 billion for 2014, a decrease of 1% from 2013. ASPs were $58 for 2014, a
decrease of $3 from 2013. These decreases were primarily due to modest price declines and a change in product mix,
partially offset by an increase in unit shipments. Total hard drive shipments in 2014 increased to 249 million units as
compared to 242 million units for the prior year primarily due to strength in our consumer electronics solutions,
including gaming consoles.
Changes in revenue by geography and channel generally reflect normal fluctuations in market demand and
competitive dynamics.
Consistent with standard industry practice, we have sales incentive and marketing programs that provide custom-
ers with price protection and other incentives or reimbursements that are recorded as a reduction to gross revenue. For
each of 2014 and 2013, these programs represented 8% of gross revenues. These amounts generally vary according to
several factors including industry conditions, seasonal demand, competitor actions, channel mix and overall avail-
ability of product.
Gross Profit. Gross profit for 2014 was $4.4 billion, a decrease of $3 million from the prior year. Gross profit as
a percentage of net revenue increased to 28.8% in 2014 as compared to 28.4% in 2013. The increase in gross profit as
a percentage of net revenue was primarily driven by higher volumes in 2014 as compared to 2013 as well as a con-
tinued focus on operational excellence.
Operating Expenses. Total research and development (“R&D”) expense and selling, general and administrative
(“SG&A”) expense increased to 16.0% of net revenue in 2014 compared to 14.8% in 2013. R&D expense was $1.7 bil-
lion in 2014, an increase of $89 million, or 6%, over the prior year. This increase was primarily due to the inclusion of
Virident and sTec’s R&D expenses from the dates of acquisition and the continued investment in product development.
As a percentage of net revenue, R&D expense increased to 11.0% in 2014 compared to 10.2% in 2013. SG&A expense
was $761 million in 2014, an increase of $55 million, or 8%, as compared to 2013. This increase in SG&A expense was
primarily due to the inclusion of Virident and sTec’s SG&A expenses from the dates of acquisition and the expansion of
sales and marketing to support new products and growing markets, partially offset by a $65 million gain on flood-related
insurance recovery. SG&A expense as a percentage of net revenue increased to 5.0% in 2014 compared to 4.6% in 2013.
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