Western Digital 2008 Annual Report Download - page 4

This is a great time to be in the growing global hard drive industry.
Storage demand and applications for hard drives continue to
proliferate in computing and consumer markets as both workplace
and lifestyle changes generate massive volumes of data to be
secured conveniently and cost effectively on hard drives.
• In fi scal 2008 the HDD market generated revenues in excess
of $35 billion with 540 million hard drives shipped, while
forecasted demand for fi scal 2009 exceeds 620 million units.
• On a unit basis, the overall hard drive market is looking at
a fi ve-year CAGR of approximately 13 percent, while those
markets served by WD are forecast to grow in excess of
16 percent annually.
• The industry’s fastest growth opportunities continue to be in the
notebook PC and branded product markets, areas of continued
emphasis for WD.
While maintaining our focus on the high-volume desktop PC
market, we remain committed to our multi-year diversifi cation
effort. As a result, hard drive revenues from non-desktop markets
expanded to 56 percent of revenue in fi scal 2008, compared with
43 percent in fi scal 2007 and 29 percent in fi scal 2006. More
specifi cally:
• We saw tremendous growth this year in the 2.5-inch notebook
PC and branded products markets:
° We tripled our 2.5-inch drive shipments, year-over-year, to
37 million units and with continued new product execution,
we are well positioned for continued growth and market
expansion in this space.
° We increased sales of our branded products by 60 percent
year-over-year to $1.4 billion and we continued to add new
products and product features to the line up, to strengthen
our leadership position in the external storage space and
expand our available market.
• At the same time we made good strides in other non-traditional
markets such as Serial ATA (SATA) drives for the enterprise
space and 3.5-inch drives for consumer electronics (CE).
° In Enterprise SATA, a fast growing portion of the enterprise
storage market, we continued to innovate with the
introduction of our 3.5-inch WD RE2-GP SATA drives with
GreenPower™ technology and the WD VelociRaptor™ drive
family, the industry’s fi rst 300 gigabyte (GB) 10,000 RPM,
2.5-inch drive.
° In CE, the introduction of our power-saving GreenPower™
technology to our WD AV hard drives, combined with
improved costs and our demonstrated fi eld quality
performance, led to enhanced value for our customers and
improved contribution to WD’s business.
CAPITAL EXPENDITURES, RESEARCH
and DEVELOPMENT SPENDING
$434
$565 $630
$334
$0
$200
$400
$600
$800
$1,000
$1,200
FY2004 FY2005 FY2006 FY2007 FY2008
Dollars in millions
$1,079
Fiscal 2008 represented our sixth consecutive year of
substantial growth in our research and development
and capital spending to support a signifi cant deepening
and acceleration of our technology capability and
broadening of our product portfolio.
*Revenue percentages are based on sales of hard drives only.
REVENUE DIVERSIFICATION*
86%
14%
79%
21%
71%
29%
57%
43%
44%
56%
$8,000
$9,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
FY2004 FY2005 FY2006 FY2007 FY2008
Desktop Revenue
Non-Desktop Revenue
$3,047
$3,639 $4,341
$5,468
$8,074
Dollars in millions
While maintaining our focus in the high-volume
desktop market, we have made major strides in
diversifying the business, by establishing our
footprint in newer, faster-growth markets. As a result,
we saw our hard drive revenue from non-desktop
markets expand to 56% in fi scal 2008.
PERCENTAGE OF REVENUE
FROM BRANDED PRODUCTS*
7% 6% 7%
16%
18%
0%
5%
10%
15%
20%
FY2004 FY2005 FY2006 FY2007 FY2008
*Based on sales of hard drives only.
Our branded products revenue grew to 18% of
total revenue, up from 16% in fi scal 2007, refl ecting
growing demand for safe and secure external
storage and for the My Book® and My Passport™
product families.