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Adoption of tiered storage architectures. With the significant increase in data storage demand, enterprises
are adopting tiered storage architectures to improve storage performance and manage the costs of this growth.
Tiered storage architecture optimizes data storage to the most appropriate storage device, driving increasing
demand for high capacity and high performance hard drives, as well as flash-based solid state storage.
WD and HGST have strong and collaborative relationships with the full range of customers who are addressing
these opportunities. These include personal computer ("PC") and Mac
TM
providers, storage subsystem suppliers, and
Internet and social media infrastructure players. We sell our products to original equipment manufacturers ("OEMs"),
distributors, resellers and consumers. WD has a strong brand and heritage with consumers with our WD Branded
Products business; HGST enjoys the same with Mac
TM
users through our G-Technology branded products.
We believe we are at the forefront of helping our customers meet the evolving storage needs of end users. Exam-
ples of these efforts include low-profile hard drives to address the emerging thin and light Ultrabook
TM
PC market --
our Connected Home innovations and our SSD drives for the high performance enterprise market. In addition, WD
and HGST are both leading providers of enterprise-class hard drives that serve the fast-growing cloud computing
market for storage.
Business Strategy
Our focused business strategy is to be an industry-leading developer and manufacturer of storage products that
enable people to create, manage, experience and preserve digital content. We strive to achieve our business strategy
through these elements:
provide compelling, high quality storage products with effective technology deployment, high efficiency, flexi-
bility and speed; and
strategically align our investments in profitable and growing markets such as mobility and cloud computing.
We believe our strategy provides these benefits:
distinguishes us in the dynamic and competitive storage industry;
provides value to our suppliers, employees, customers and shareholders;
allows us to achieve consistent financial performance, including strong returns on invested capital and cash
flow generation; and
provides continued diversification of our storage product portfolio and entry into additional growing adjacent
markets.
Industry
Storage continues to be critical to the large amounts of digital content being created; we believe that the volume
of petabytes stored will grow approximately 33% annually from calendar 2011 to calendar 2016.
The PC market, including notebook and desktop PCs, comprises the client market, the highest volume market
for our products. In calendar 2011, the PC market represented 73% of our unit shipments.
Increasingly, data storage needs are being driven by mobile and cloud-based applications such as video, photog-
raphy and audio on tablets, smart phones and other handheld devices. The growth in the number of computing users
in the world is unabated, creating more usage and more digital content to be stored. Cloud computing applications
are especially noteworthy given that they create multiple copies of photos, videos and other content to ensure efficient
distribution and security.
We believe unit volumes in the hard drive industry were down 5% in calendar year 2011 from calendar 2010 as
historic flooding in Thailand shuttered approximately 45% of the industry's assembly capacity and a majority of its
supply chain between mid-October 2011 and February 2012. Each industry market was negatively affected by the
flooding, with branded products suffering the greatest setbacks.
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