10-KPeriod: FY2011

WESTERN DIGITAL CORP Annual Report, Year Ended Jul 1, 2011

Filed August 12, 2011For Securities:WDC

Summary

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 billion, 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 billion 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.

Financial Highlights

52 data points
Beta

Revenue

$9.53B

18.8% Gross Margin

Net Income

$726.00M

7.6% Net Margin

EPS (Diluted)

$3.09

Total Assets

$8.12B

Cash & Equivalents

$3.49B

Free Cash Flow

$877.00M

Financial Statements
Beta
Revenue$9.53B
Cost of Revenue$7.74B
Gross Profit$1.79B
SG&A Expenses$282.00M
Operating Expenses$1.01B
Operating Income$781.00M
Net Income$726.00M
EPS (Basic)$3.14
EPS (Diluted)$3.09
Shares Outstanding (Basic)231.00M
Shares Outstanding (Diluted)235.00M

Key Highlights

  • 1Western 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.
  • 2Net 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.
  • 3Despite lower revenue, total hard drive unit shipments increased to 207 million units in FY2011 from 194 million units in FY2010.
  • 4Gross margin percentage declined to 18.8% in FY2011 from 24.4% in FY2010, attributed to an aggressive pricing environment.
  • 5Research and Development (R&D) expenses increased by 15% to $703 million in FY2011, reflecting continued investment in new product development.
  • 6The 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.
  • 7No single customer accounted for 10% or more of net revenue in FY2011 and FY2010, though Dell Inc. represented 10% of net revenue in FY2009.

Frequently Asked Questions

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.

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.

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.

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.