Western Digital 2015 Annual Report Download - page 30

Download and view the complete annual report

Please find page 30 of the 2015 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 116

  • 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

density may require us to make further capital expenditures on items such as new test equipment needed as a result of
an increased number of gigabytes per platter. Our inability to achieve cost reductions could adversely affect our
operating results.
If we do not properly manage technology transitions, our competitiveness and operating results may be negatively affected.
The storage markets in which we offer our products continuously undergo technology transitions that we must
anticipate and adapt our products to address in a timely manner. If we fail to implement new technologies success-
fully, or if we are slower than our competitors at implementing new technologies, we may not be able to com-
petitively offer products that our customers desire, which could harm our operating results.
If we do not properly manage new product development, our competitiveness and operating results may be negatively affected.
As advances in computer hardware and software are made, our customers have demanded a more diversified port-
folio of products with new and additional features. In some cases, this demand results in investments in new products
for a particular market that do not necessarily expand overall market opportunity, which may negatively affect our
operating results.
In addition, the success of our new product introductions depends on a number of other factors, including:
‰difficulties faced in manufacturing ramp;
‰implementing at an acceptable cost product features expected by our customers;
‰market acceptance/qualification;
‰effective management of inventory levels in line with anticipated product demand;
‰quality problems or other defects in the early stages of new product introduction and problems with compati-
bility between our products and those of our customers that were not anticipated in the design of those prod-
ucts; and
‰our ability to increase our software development capability.
In particular, as part of our growth strategy, we have made significant investments in active archive systems,
which are designed to enable organizations to rapidly access massive long-term data stores. For example, our acquis-
ition of Amplidata was partially driven by our strategy to expand in this area. We expect to continue to make sig-
nificant investments in active archive systems. Our active archive systems may fail to gain market acceptance, or the
market for active archive systems may not grow as we anticipate.
We have also seen, and anticipate continuing to see, an increase in customers requesting that we develop prod-
ucts, including software associated with our products, that incorporate open source software elements and operate in
an open source environment. Adapting to this demand may cause product delays, placing us at a competitive dis-
advantage. Open source products could also reduce our capability for product differentiation or innovation and our
affected products could be diminished to commodity status, which we expect would place increased downward pres-
sure on our margins. If we fail to successfully anticipate and manage issues associated with our product development
generally, our business may suffer.
If we fail to develop and introduce new products that are competitive against alternative storage technologies, our business may
suffer.
Our success depends in part on our ability to develop and introduce new products in a timely manner in order to
keep pace with technology advancements. Newer storage technologies have successfully served mobility markets for
products that cannot be serviced using traditional storage technologies. Advances in semiconductor technology have
resulted in other emerging technologies that can be competitive with traditional storage technologies. For example,
SSDs have significantly increased their penetration in notebook PCs in recent years. We believe that SSDs will
increasingly replace HDDs in notebook and desktop PCs, and we currently do not offer client SSD solutions. We also
expect that SSD penetration will increase in enterprise areas requiring high performance needs in advanced digital
24