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Western Digital® Corporation Annual Report & Form 10-K 2013 The Company Founded in 1970, Western Digital Corporation is an industry-leading developer and manufacturer of storage solutions that enable people to create, manage, experience and preserve digital content. Its WD® and HGST subsidiaries are long-time innovators in the storage industry. HGST develops advanced hard drives, enterprise-class solid-state drives and innovative external storage solutions and services used to store, preserve and manage the world’s most valued data. Founded by the pioneers of hard drives, HGST provides high-value storage for a broad range of markets, including enterprise, mobile computing, consumer electronics and personal storage. For information about HGST products, visit hgst.com. WD develops high-performance hard drives and solid-state drives that are deployed in desktop and mobile computers, enterprise computing systems, embedded systems and consumer electronics applications, as well as by the company in providing its own storage products. WD’s leading storage devices and systems, networking products, media players and software solutions empower people around the world to easily save, protect, share and experience their content on multiple devices. For information about WD products, visit wd.com. Western Digital Corporation is responding to changing market needs by providing a full portfolio of compelling, high quality storage products with effective technology deployment, high efficiency, flexibility and speed. Our products are marketed under the HGST, WD and G-Technology™ brands to OEMs, distributors, resellers and consumers. Financial and investor information is available on the company’s website at investor.wdc.com. Steve Milligan, President and Chief Executive Officer Dear Fellow Shareholders: REVENUE During fiscal year 2013, we demonstrated the strength Dollars in millions $15,351 $16,000 of our business model with excellent operating results $14,000 $12,478 $12,000 underpinned by strong execution by our HGST and WD $9,850 $9,526 $10,000 $7,453 $8,000 subsidiaries. We also continued to expand our footprint in $6,000 $4,000 the storage industry through investments addressing high $2,000 $0 growth opportunities in the public and private clouds, thin FY2009 FY2010 FY2011 FY2012 FY2013 and light ultraportable devices and the Connected Life in Collaborative relationships with customers, the growth in digital data and the acquisition of HGST have led to a 106% increase in homes and small and medium-sized businesses. revenue since fiscal 2009. Revenue for fiscal year 2013 was $15.4 billion, up 23% from $12.5 billion in fiscal 2012, reflecting the PERCENTAGE OF REVENUE FROM NON-PC MARKETS contribution of a full year of HGST operations. We 60% 50% 50% generated $3.1 billion in cash from operations during 37% 36% 40% 34% 34% the fiscal year and our free cash flow totaled 30% 20% $2.2 billion (which consisted of cash flow from 10% 0% FY2009 FY2010 FY2011 FY2012 FY2013 operations less capital expenditures). As part of our For fiscal 2013, 50% of our revenue was capital allocation strategy, we repurchased 19.0 million derived from non-PC markets, which include enterprise applications, branded products shares in fiscal 2013 for $842 million. We also declared and CE products. dividends totaling $1.00 per share, or $240 million, during fiscal year 2013. EARNINGS PER SHARE Our broad-based participation in the creation, $8.00 management, experience and preservation of digital data $7.00 $6.58 $5.93 $6.00 is resulting in a more diversified revenue mix. Over the $5.00 $3.98 last five years our non-PC related businesses have grown $4.00 $3.09 $3.00 $2.08 $2.00 from 34% to 50% of our revenue, driven by our enterprise $1.00 $0 and branded products businesses, both of which address FY2009 FY2010 FY2011 FY2012 FY2013 cloud computing. PCs remain an important market for our A highly efficient business model, focus on operational excellence and experienced products, but we are less reliant on them than at any time management team underpin our ability to deliver solid profitability. Fiscal 2013 included a $681 million charge related to since the inception of the PC. an arbitration award. We are well positioned to capitalize on an important long- NET CASH term secular growth trend — the ongoing expansion in Dollars in millions digital data — as consumers and commercial enterprises $3,500 $3,196 $3,000 increasingly interact with digital content on a daily basis. $2,500 $2,334 $2,354 $2,000 $1,500 $1,312 We are seeing dramatic changes in the storage $1,023 $1,000 $500 industry — changes in the needs, use cases and $0 FY2009 FY2010 FY2011 FY2012 FY2013 buying patterns of existing and new customers as Net cash (cash and cash equivalents less they grapple with the challenges of managing this debt) ended the year at $2.4 billion, up $1.3 billion from the end of fiscal 2012. growth. This has resulted in more strategic relationships with customers, as we collaborate, innovate and CASH FLOW FROM OPERATIONS Dollars in millions create additional value with our significant technology $3,200 $3,067 $3,119 resources and highly experienced storage teams. $2,800 $2,400 $1,942 We have established a leadership position in the fastest $2,000 $1,655 $1,600 $1,305 $1,200 growing areas of the industry and in the last year we have $800 $400 introduced several new products aimed at building on this $0 FY2009 FY2010 FY2011 FY2012 FY2013 leadership, including our: Strong profitability and disciplined balance sheet management generated cash flows from • 7-platter, helium sealed drives that address the energy operations of $3.1 billion during fiscal 2013. and space cost challenges of our cloud infrastructure customers, RESEARCH AND DEVELOPMENT SPENDING Dollars in millions • low-profile 5 and 7 millimeter solid state hybrid drives $1,572 $1,600 $1,400 and hard drives designed for new ultraportable $1,200 $1,055 $1,000 devices, $800 $611 $703 $509 $600 • hard drive and NAS solutions for small and $400 $200 medium-sized businesses (SMB), and $0 FY2009 FY2010 FY2011 FY2012 FY2013 • expanding offering of enterprise-class solid state Research and development continued to increase as we invested in new products and innovative technology to meet drives for the most demanding applications in tiered customer needs. enterprise storage architectures. In addition to investing in our core business, we are CAPITAL EXPENDITURES Dollars in millions $952 making highly selective strategic investments to augment $1,000 $778 $800 $737 $717 and strengthen our capabilities to address the future $600 $519 $400 needs of new and existing customers. These actions $200 $0 include the pending acquisition of Virident and the FY2009 FY2010 FY2011 FY2012 FY2013 acquisitions of sTec and VeloBit, which collectively will Capital expenditures were $952 million during fiscal 2013 as we continued to invest to support our future growth and recovered enhance the value of our offerings in enterprise solid from the Thailand flooding. state storage, a fast growing, rapidly changing and highly strategic space, and the acquisition of Arkeia Software, SHAREHOLDERS’ EQUITY Dollars in millions which provides network backup software and appliances $8,000 $7,669 $7,893 to our SMB business. $7,000 $6,000 $5,488 $5,000 $4,709 We are excited about the long-term outlook for storage $4,000 $3,192 $3,000 and our increasingly strategic position within the $2,000 vast digital data ecosystem, and we will continue to $1,000 $0 FY2009 FY2010 FY2011 FY2012 FY2013 explore ways to enhance our value. We are a market Our long-term, sustained profitability has and customer driven company, focused on growth resulted in $7.9 billion of shareholders’ equity at the end of fiscal 2013. and innovation. I am confident that this approach will differentiate us as one of the world’s leading technology companies in the years ahead. Steve Milligan President and Chief Executive Officer September 27, 2013 [THIS PAGE INTENTIONALLY LEFT BLANK] UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 28, 2013 Or ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8703 WESTERN DIGITAL CORPORATION (Exact Name of Registrant as Specified in Its Charter) Delaware 33-0956711 State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization Identification No.) 3355 Michelson Drive, Suite 100 92612 Irvine, California (Zip Code) (Address of principal executive offices) Registrant’s telephone number, including area code: (949) 672-7000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $.01 Par Value Per Share The NASDAQ Stock Market LLC (NASDAQ Global Select Market) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘ Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).