1. T C
Western Digital Corporation is a
leader in information storage
management. The Company
makes hard disk drives for the
world’s leading makers of per-
sonal computers, and serves
consumer markets for replacement
and add-on data storage. The
Company is using proven technol-
ogy and production methods as it
begins the manufacture of high-
performance, high-capacity hard
drives for use in workstations,
servers and other network appli-
cations. Storage connectivity is
provided by Western Digital’s
high-performance hard drive con-
trollers and its family of host bus
controllers for SCSI, Fibre
Channel and PCI interfaces.
These products enhance data
communication between proces-
sors, storage units and peripherals.
2. Financial Highlights
.
Years ended
(in millions, except per July 1, June 30, June 30, June 30, June 30,
share and employee data) 1995 1994 1993 1992 1991
Revenues, net $ 2,130.9 $1,539.7 $1,225.2 $ 938.3 $ 986.2
Gross profit 394.1 317.9 182.0 110.6 173.2
Operating income (loss) 133.0 91.9 (10.0) (67.0) (117.8)
Net income (loss) 123.3 73.1 (25.1) (72.9) (134.2)
Earnings (loss) per share:
Primary 2.56 1.77 (.79) (2.49) (4.59)
Fully diluted $ 2.47 $ 1.70 $ (.79) $ (2.49) $ (4.59)
Working capital $ 360.5 $ 261.7 $ 111.5 $ 138.9 $ 167.3
Total assets 858.8 640.5 531.2 532.5 620.4
Total long-term debt — 58.6 182.6 243.0 234.9
Shareholders’ equity $ 473.4 $ 288.2 $ 131.0 $ 112.3 $ 185.1
Number of employees 7,647 6,593 7,322 6,906 6,740
3. To O u r S h a r e h o l d e r s :
.
W D . Revenues and Operating Income
(in millions)
earnings grew to record levels in fiscal 1995 even though competition
remained intense, particularly in our core hard drive business. We were able
to gain hard drive market share, improve our financial position and earn an
important quality distinction last year, thanks to the dedication and hard
work of more than seven thousand Western Digital employees worldwide.
Charles A. Haggerty Our Microcomputer Products Group posted very satisfying results,
operating profitably throughout the year for the first time. This improvement was made in con-
cert with the conversion of the Group’s integrated circuit packaging and test plant in Malaysia to
hard drive production, which required a shift to complete reliance on external sources for compo-
nents. We have ambitious long-term growth goals for this operation.
The Company’s Personal Storage Group again set records in unit shipments and revenues.
Competition remains very tough in this part of our business, which has settled into a cluster of
five principal competitors. Western Digital ranks among the top producers of 3.5-inch hard
drives for personal computers, and indications are that our Personal Storage Group was a leader
in market share gains last year. Revenues
(in millions)
This very profitable and responsive operation, by far our largest, is regularly first to market
and first to volume in its industry’s unending product-development marathon. Its facilities are
being expanded, and its prospects are bright.
A third product group has been created to design and produce high-performance, high-
capacity hard drives. The market for these drives, currently with capacities of two gigabytes or
more, is being driven by strong demand from producers of workstations and servers. These
segments account for roughly 22 percent of the hard drive industry’s revenue and a greater por-
tion of its operating earnings. We are certain that Western Digital’s reputation for quality, relia-
bility, responsiveness and customer satisfaction will help our new product line take hold quickly.
This is an extremely important strategic step for our Company. A manufacturing facility for this
activity is now being prepared in Singapore and is scheduled to be in production by the end of
fiscal 1996.
The amount and quality of the competition in all our product lines require that the
Company maintain a regular flow of fresh, innovative products. With a goal of keeping
4. .
Earnings per
Western Digital first in quality market, first to market and first to volume, we have committed to
Share
invest more than $1 billion in research and development over the next five years.
Western Digital’s strong financial performance last year enabled us to reduce the Company’s
long-term debt to zero. The last debt issue, about $40 million of convertible subordinated deben-
tures, was called for redemption in June 1995.
The Company’s share-repurchase program, extended by the Board of Directors until
September 1996, was interrupted by the call of our convertible debenture issue. As of the fiscal
year’s end, our treasury had completed the purchase of about one and a half percent of the
Company’s shares. The Board’s authorization is for as much as 10 percent. We will continue to
monitor stock price movements and act when appropriate in order to build value for our
shareholders.
During the 1995 fiscal year, Western Digital earned company-wide ISO 9001 registration,
becoming the first of the then-member companies of the FORTUNE 500 to be so recognized.
The award of this registration honors the establishment of quality-assurance processes throughout
Western Digital, from manufacturing and marketing to such enterprise-wide services as human
resources and finance, and in locations from Singapore and Malaysia to Irvine and Munich. We Shareholders’ Equity
(in millions)
take it as a challenge to further improve our commitment to excellence in high-technology prod-
ucts, processes and communication.
We have many opportunities: continued rapid market growth in PC hard drives; the leverage
of our Company’s expertise in semiconductor devices, input/output links, software and board
designs into the development of fibre channel fabric products; and the great promise offered by
markets for our exciting new high-performance, high-capacity hard drives. So, we are optimistic
about the future of our markets and of Western Digital. We aim to take advantage of the opportu-
nities before us.
Sincerely,
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President and Chief Executive Officer
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5. .
Serving Global Markets for Infor mation Storage Management
Western Digital Products
Data Storage
Personal Storage
Data Storage
High Performance Storage
Connectivity
Input/Output
6. .
Personal Computing
Desktop PC Mobile PC
Enterprise Computing
Printers
CD-ROMs
Other Peripherals
Storage/Network/
Application Server
Desktop/Workstation/Client PC
A leader in information storage management, Western Digital makes possible the most effective individual and
enterprise uses of computers by offering products that provide high-efficiency data storage and connectivity.
7. Personal Storage Products
.
P , home offices and small Worldwide Desktop
businesses continued to dominate computer-industry sales over the past (3.5-Inch) and Mobile
year. These fast-growing segments propelled the computer industry to (2.5-Inch) Hard Drive
record shipments of 52 million desktop and mobile units, and with them, Market Forecast
record shipments of hard drives. Once again, our market grew faster than (units in millions)
expected.
Western Digital shipped 10.2 million drives last year, 49 percent more Source: IDC, August 1995
than in the preceding fiscal year. Industry analysts tell us our unit-shipment
growth in calendar year 1994 yielded a three-point increase in share of the
global hard drive market, the industry’s largest.
We benefited in fiscal 1995 from numerous industry awards, and
widespread market recognition and acceptance of our Caviar hard drives,
the industry’s best known brand. Of every ten drives we make, three are
Kathryn A. Braun
marketed through resellers for system integration, storage capacity addi-
tions, and to meet the upgrade demand from the PC installed base.
The industry outlook is bright. International economies are growing stronger. While U.S.
consumer demand drove the growth last year, a strong consumer market is emerging in Europe
and Asia. As PC microprocessor technology continues its fast pace and new, capacity-hungry
software applications and operating systems such as Windows 95 enter the market, the demand
for bigger, better, faster storage systems will continue to be met by our world-class team.
The Personal Storage Group’s production capacity grew 50 percent over the past year, from
1.9 million units per quarter to 2.85 million. Additions and improvements now under way could
raise our capacity to four million units per quarter by the end of the current calendar year.
Component and material scarcities that plagued our industry during its recent rapid growth
were made known to us early because of Western Digital’s first-to-market, first-to-volume product
introduction techniques. As we saw shortages developing, we were able to make changes to
improve the availability of adequate supplies of most materials. In the case of disk media, we
changed manufacturing methods and added a line to increase capacity by one third. Two more
lines will be added this year. We now make about a third of our own media.
For the future, we will continue to focus aggressively on the quality and reliability that built
the Caviar drive line’s great reputation. We will continue our cost leadership under Western
Digital’s “virtual vertical integration” style of production management. We’ll continue to leverage
the Company’s electronic design expertise into every new product. And, we will continue our
effort to lead the fast growing retail market as consumers increasingly prefer our widely recog-
nized Caviar drives.
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8. Input/Output Products
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cation channels.
leverage its knowledge into a much broader line of products for high-performance data communi-
grated semiconductor devices, input/output links, software and board designs, our team is set to
enhanced by the addition of these new products. With the Company’s background in highly inte-
Western Digital’s leadership position in information storage management is further
communication of data across the campus of a university, a medical center or a large corporation.
fabric communications. This remarkable technology permits better and faster enterprise-wide
strategic move, as it improved our capabilities in the exciting business of high-speed, fibre channel
Developments in fiscal 1995 proved Western Digital’s Modulinc acquisition to be a sound
capabilities for personal computers using the familiar Peripheral Component Interconnect bus.
controllers—products that provide access to high-performance Small Computer System Interface
announced and shipped three host controller products based on our highly successful SCSI device
ucts that were leveraged from earlier technological developments. We
Kenneth E. Hendrickson Microcomputer Products last year began shipping exciting new prod-
links between computing, storage and peripherals.
opportunities for exciting technological advancements in the high-speed
growth opportunities. They are highly competitive, but these markets offer
Markets for the Group’s input/output products offer outstanding
will be added in the current year.
Source: IDC, 1995 costs as we enlarged our set of dependable supply partners. More suppliers
ity. On that new basis we were able to show shorter cycle times and lower
(units in millions) Fiscal 1995 was our Group’s first full year without a fabrication facil-
and Multi-user Systems)
or exceeded its plan in revenue and gross profit.
Servers, Workstations,
cal 1995. The Group improved its financial predictability as our team met
Forecast (Clients,
Computer Market fiscal 1994, and contributed to the Company’s bottom line throughout fis-
Worldwide Enterprise T M P G in late
.
Microcomputer Products