2016 Annual Report and Form 10-K

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2016 Annual Report and Form 10-K Corporate Headquarters Stock Exchange Listing Delivering the possibilities of data Western Digital Corporation Western Digital’s common stock trades 3355 Michelson Drive, Suite 100 on The NASDAQ Global Select MarketSM Irvine, California 92612 under the symbol WDC. 949.672.7000 Investor Relations Worldwide Websites investor.wdc.com westerndigital.com [email protected] investor.wdc.com 800.695.6399 hgst.com sandisk.com wd.com Transfer Agent and Registrar Independent Registered Public American Stock Transfer & Trust Company, LLC Accounting Firm Operations Center - 6201 15th Avenue KPMG LLP 2016 Annual Report Brooklyn, New York 11219 amstock.com 800.937.5449 and Form 10-K Financial and investor information is available on the company’s Investor Relations website at investor.wdc.com. Forward-Looking Statements This Annual Report contains forward-looking statements, including but not limited to, statements relating to the expectations regarding: the growth of digital data and demand for digital storage; the anticipated benefits of Western Digital’s acquisition of SanDisk Corporation and of the integration of the HGST, SanDisk and WD businesses; Western Digital’s positioning and opportunities in the storage industry; Western Digital’s investments in and development of new technologies; and Western Digital’s goal to pay down debt, attain investment grade status and continue paying dividends. These forward-looking statements are based on Western Digital’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including: volatility in global economic conditions; challenges associated with the integration of SanDisk and HGST; business conditions and growth in the storage ecosystem; pricing trends and fluctuations in average selling prices; dependence on business ventures and strategic partnerships for future product development, sales growth and supply; the sufficiency of available liquidity to meet debt and dividend needs; the availability and cost of commodity materials and specialized product components; actions by competitors; the development and introduction of products based on new technologies and expansion into new data storage markets; and other risks and uncertainties listed in Western Digital’s Annual Report on Form 10-K for the fiscal year ended July 1, 2016, to which your attention is directed. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and Western Digital undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances. Western Digital, WD, the WD logo, My Cloud and G-Technology are trademarks of Western Digital Technologies, Inc. and/or its affiliates. Western Digital Technologies, Inc. is a wholly-owned subsidiary of Western Digital Corporation. HGST trademarks are intended and authorized for use only in countries and jurisdictions in which HGST has obtained the rights to use, market and advertise the brand. All other trademarks mentioned are the property of their respective owners. © 2016 Western Digital Technologies, Inc. All rights reserved. 2278-001005-A12 Sept. 2016 The Company Corporate Information The power of data is undeniable—creating a world that’s more predictive, more productive and Board of Directors more personal, enabling smarter decisions, breakthrough discoveries and deeper connections. At Western Digital, we believe in the promise of data. We’re redefining how the world keeps and Matthew E. Massengill Len J. Lauer leverages data. We power the technology and develop the solutions that shape our lives. At every Chairman of the Board Lead Independent Director step, we innovate with purpose to deliver the possibilities of data. Former President and Chief Executive Officer Chairman and Chief Executive Officer Western Digital Corporation Memjet Western Digital is the world’s largest data storage solutions provider. Our innovative storage Martin I. Cole Sanjay Mehrotra solutions that provide customers with high capacity, flexibility and speed are at the heart of many Former Chief Executive Former President and Chief Executive Officer of the world’s largest datacenters, and embedded in advanced smartphones, tablets, and PCs. Accenture plc Technology Group SanDisk Corporation Our consumer products are available at hundreds of thousands of retail stores worldwide. Whether marketed under the WD, HGST or SanDisk brands, our storage solutions power the Kathleen A. Cote Stephen D. Milligan Chief Executive Officer markets and companies that shape our lives—enabling possibilities for the cloud, enterprise and Former Chief Executive Officer Worldport Communications, Inc. Western Digital Corporation sophisticated infrastructures everywhere. Henry T. DeNero Paula A. Price Western Digital employs more than 70,000 people in locations worldwide, designing, Former Chief Executive Officer Senior Lecturer of Business Administration developing, manufacturing and marketing our solutions for the data-driven world. Homespace, Inc. Harvard Business School Michael D. Lambert Former Senior Vice President Dell, Inc. WD has been a technology standard-setter in the industry’s highest volume markets. WD’s hard drives are deployed in personal computers, enterprise computing systems, consumer electronics and digital video applications, as well as in its external storage, personal cloud and business Executive Officers storage solutions portfolios. WD empowers people around the world to easily save, protect, share and experience their content on multiple Stephen D. Milligan Steven G. Campbell connected devices. For more information about the WD brand, please visit Chief Executive Officer Executive Vice President and Chief Technology Officer wd.com. Michael D. Cordano Jacqueline M. DeMaria President and Chief Operating Officer Executive Vice President and Chief Human Resources Officer HGST helps organizations harness the power of data to unlock the greater Mark P. Long business potential through a broad portfolio of storage solutions. HGST’s President WD Capital, Chief Strategy Officer Michael C. Ray smarter storage solutions are everywhere, touching lives and enabling and Chief Financial Officer Executive Vice President, Chief Legal Officer possibilities for cloud, enterprise and sophisticated infrastructures, and and Secretary powering the markets and companies that shape our lives. HGST is trusted and relied upon by people who are moving the world forward with innovation. For more information about the HGST brand, please visit hgst.com. SanDisk provides trusted and innovative flash storage products that have transformed the electronics industry. SanDisk’s quality, state-of-the-art solutions are at the heart of many of the world’s largest datacenters, and embedded in advanced smartphones, tablets and PCs. SanDisk’s consumer products are available at hundreds of thousands of retail stores worldwide. For more information about the SanDisk brand, please visit sandisk.com. A Message from the CEO Dear Fellow Shareholders, This was a transformative year for our company. In fiscal 2016, we successfully completed the acquisition of SanDisk, commenced the integration of substantial portions of our WD and HGST businesses and embarked on a joint venture with our strategic partner Unis in China. These significant developments have laid the foundation for us, as the world’s largest data storage solutions provider, to make the promise of data a reality and Steve Milligan Chief Executive Officer deliver on its possibilities. Western Digital Corporation We are continuing to execute the vision we laid out several years ago to provide a full spectrum of storage solutions to our customers across three key categories: Datacenter Devices and Solutions, Client Devices, and Client Solutions. Given our rich heritage of operational excellence, broad R&D capabilities and extensive product and technology assets, we’re excited about our path ahead as a truly broad-based developer, manufacturer and provider of storage solutions. In addition to achieving the transformative milestones of the past year, we have also made significant progress on our key initiatives to drive value creation: • We completed the alignment of our product and technology roadmaps involving legacy WD, HGST and SanDisk products. • We celebrated the opening of the New Fab 2 wafer manufacturing facility in Yokkaichi, Japan with Toshiba, underscoring the continued strength of our 16-year NAND partnership. • We announced our next-generation 3D NAND technology, BiCS3, with an industry-leading 64 layers of vertical storage capability. Pilot production of BiCS3 has commenced, and we expect meaningful commercial volumes in the first half of calendar 2017. • We are on target to achieve our synergy goals from the integration activities that are underway. • We remain focused on investing in our business and technology to ensure that we can adapt quickly to address shifting customer needs and industry developments. We, along with our customers, are immersed in and responding to the new and emerging drivers of growth and innovation. These include changes in the methods of storage in client devices, new product cycles in mobile devices and PCs, as well as increasing digital content being stored and managed on hard drives and SSDs in the cloud environment. Not only are we seizing the opportunity in mobile and cloud, but we are also benefiting from SSDs penetrating further into
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