01—Abstract
Summary
Summary of the 10-K filed August 12, 2011. Cited figures are marked; the original filing is the authoritative source.
Western Digital Corporation (WDC) has filed its annual report for the fiscal year ended July 1, 2011.
The company is a global provider of data storage solutions, primarily through hard disk drives (HDDs) and also offers solid-state drives (SSDs) and home entertainment/networking products. The most significant development discussed is the planned acquisition of Hitachi Global Storage Technologies (HGST) for approximately $4.3 billiona, expected to close in Q2 FY2012. This acquisition is subject to regulatory approvals and will be financed through cash, debt, and newly issued WDC shares.
The company also reported a decrease in net revenue for FY2011 to $9.5 billionb from $9.8 billion in FY2010, largely due to a decline in average selling prices (ASPs) for HDDs, despite an increase in unit shipments. Gross margins also saw a significant decrease. Management highlights investments in R&D and sales expansion to support new products and markets.
The company continues to emphasize operational excellence, product quality, and strong customer relationships. Key risks include integration challenges with HGST, volatile industry pricing, competition, and global economic conditions.
02—Key points
Key Highlights
- Western Digital announced the planned acquisition of Hitachi Global Storage Technologies (HGST) for approximately $4.3 billion, expected to close in the second quarter of fiscal year 2012.
- Net revenue for fiscal year 2011 decreased by 3% to $9.5 billion, compared to $9.8 billion in fiscal year 2010, primarily due to a decrease in Average Selling Price (ASP) of HDDs from $50 to $45.
- Despite lower revenue, total hard drive unit shipments increased to 207 million units in FY2011 from 194 million units in FY2010.
- Gross margin percentage declined to 18.8% in FY2011 from 24.4% in FY2010, attributed to an aggressive pricing environment.
- Research and Development (R&D) expenses increased by 15% to $703 million in FY2011, reflecting continued investment in new product development.
- The company held substantial cash and cash equivalents of $3.5 billion at the end of FY2011, an increase of $756 million from the prior year.
- No single customer accounted for 10% or more of net revenue in FY2011 and FY2010, though Dell Inc. represented 10% of net revenue in FY2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Western Digital Corp kept $0.08.
- Revenue$9.53B100.0%
- Cost of revenue−$7.74B81.2%
- Gross profit$1.79B18.8%
- Operating costs−$1.01B10.6%
- Operating income$781.0M8.2%
- Interest, other & tax−$55.0M0.6%
- Net income$726.0M7.6%
Where FY2011 revenue went
$9.53B- Cost of revenue: $7.74B, 81% of revenue
- Net income: $726.0M, 7.6% of revenue
- SG&A: $282.0M, 3.0% of revenue
- Other operating costs: $728.0M, 7.6% of revenue
- Interest, other & tax: $55.0M, 0.6% of revenue
Kept 7.6% as net incomeNet income $726.0M · 7.6%Interest, other & tax $55.0M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed August 12, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $9.53B$9.85B | −3.3% |
| Cost of Revenue | $7.74B$7.45B | +3.8% |
| Gross Profit | $1.79B$2.40B | −25.4% |
| SG&A Expenses | $282.00M$265.00M | +6.4% |
| Operating Expenses | $1.01B$876.00M | +15.3% |
| Operating Income | $781.00M$1.52B | −48.8% |
| Net Income | $726.00M$1.38B | −47.5% |
| EPS (Basic) | $3.14$6.06 | −48.2% |
| EPS (Diluted) | $3.09$5.93 | −47.9% |
| Shares Outstanding (Basic) | 231.00M228.00M | +1.3% |
| Shares Outstanding (Diluted) | 235.00M233.00M | +0.9% |
05—Questions
Frequently Asked Questions
What is the main strategic initiative for Western Digital in fiscal year 2011?
The most significant strategic initiative is the planned acquisition of Hitachi Global Storage Technologies (HGST) for approximately $4.3 billion. This acquisition is expected to enhance the company's scale, product portfolio, and technological capabilities.
How did the company's financial performance change in fiscal year 2011 compared to fiscal year 2010?
Net revenue decreased slightly by 3% to $9.5 billion, driven by lower Average Selling Prices (ASPs) for hard drives, despite an increase in unit shipments. Gross margins also decreased significantly due to pricing pressures. Operating income and net income also saw declines compared to the strong performance in FY2010.
What are the key risks mentioned in the filing?
Key risks include challenges related to the successful integration of HGST, the highly competitive nature of the storage industry with pricing volatility, risks associated with global economic conditions, potential disruptions in supply chains, and technological obsolescence.
What is the company's outlook for revenue and margins?
For the September quarter (Q1 FY2012), the company expects revenue to increase slightly due to seasonality. However, the overall trend in FY2011 showed declining ASPs and gross margins, suggesting continued pricing pressure in the market. The successful integration of HGST and broader market conditions will significantly influence future performance.
06—Continue